Construction and industry increase their weighting in Mozambican economy

29 August 2011

Lisbon, Portugal, 29 Aug – Mozambique will continue to grow at a rate above the average for sub-Saharan Africa over the next few years, with construction, cement production and mining increasing their weighting within the economy, according to Portuguese bank BPI.

The outlook for the Mozambican economy, BPI said in its latest report on Mozambique, remain favourable and it is expected that real GDP growth will increase from 7.2 percent this year to almost 8 percent in the medium term.

This growth, it said, reflects a “boost to activity related to large projects and a rise in public investment.”

“The growth outlook for Mozambique is significantly more favourable than for the overall group of sub-Saharan African countries,” with GDP in 2011 growing by 7.2 percent, or 1.7 percentage points above the regional average.

“Over the next few years, it is expected that the construction sector will significantly increase its contribution to GDP, after the Mozambican government announced the renegotiation of contracts for large investment projects in the country, with the aim of increasing their contribution to economic activity,” aid BPI.

At the moment, the so-called large projects account for around 4 percent of the State’s total revenues and directly responsible for 10 percent of the country’s GDP.

“Given the growing interest of foreign investors in Mozambique, particularly in its mining resources, it would not be surprising if new deals are less generous to investors,” the report said.

Another activity that is expected to make a greater contribution over the next few years is cement production, which could triple by 2013, thanks to investment by Chinese cement companies and one South African cement company.

The mining sector also has a highly favourable outlook as it is benefitting from growing coal production in the country, particularly at the Moatize and Benga, mines in Tete province.

In 2010, the agricultural sector was the main driver of the economy, accounting for 1.6 percentage points of total GDP growth, despite continuing to show low productivity levels, and to involve mainly subsistence crops.

The main contributions came from Transport and Communications and Retail, “reflecting the high expansion of the both sectors and growing domestic demand.”

BPI noted some risks to the favourable economic climate apparent in Mozambique, such as restrictive monetary policies, which have consequences on the activities of the private sector and robustness of the banking sector.

The rise in the prices of food and fuel is also expected to have an impact, as well as a drop in humanitarian aid, which may not be sufficiently outweighed by a rise in public revenue, thus leading to budgetary constraints.

In terms of prices Bpi expects inflation to drop to one digit and reach the target of 5-6 percent over the next two years.

Mozambique’s current account deficit is expected to increase slightly to 11 percent of GDP, “made up for by strong exports from the large coal mining projects,” the report said.

These projects, it said, “will make it possible to build up enough foreign currency reserves to cover five months of imports by 2016.” (macauhub)