Mozambique’s economy sees rates of growth close to those of China

3 December 2012

The Mozambican economy continues to “expand at a rapid rate,” bucking the global trend and may soon become one of the most dynamic in the world, even outperforming rates of growth in China, according to Portuguese bank BPI.

Mozambique, the bank said in its latest report on the country, “is resisting a slowdown in world economic activity, maintaining a high rate of expansion as a result of the recent development of the mining sector and increasing influxes of foreign investment into the country.”

“Despite starting from a reduced basis, the country may soon become one of the countries with biggest economic growth, able to exceed rates of growth recorded in China,” it said.

In its latest assessment of the Mozambican economy, the International Monetary Fund (IMF) raised its forecast for economic growth to 7.5 percent in 2012 and 8.4 percent in 2013.

The Economist Intelligence Unit (EIU) recently raise its projection for growth in Mozambique to 7.4 percent, or 0.2 percentage points higher than its previous projection of 7.2 percent.

Exports are driving growth. Forty percent of current exports are aluminium but with coal, which began to be exported in 2011, accounting for an increasingly significant share.

Mozambique “may emerge as the world’s main coal exporter due to its large reserves,” despite constraints related to a weak logistics base to carry the coal to ports on the Indian Ocean.

However, the document said, political instability in South Africa, a great economic partner that has seen its growth projections lowered, “may negatively affect Mozambique’s international trade over the next few months.”

Another challenge for the authorities, this time from a budgetary point of view, is reduced foreign aid, which still makes up almost 30 percent of public revenue.

Foreign direct investment (FDI), which has mainly been channelled into coal and gas exploration following discoveries of huge reserves, reached an all-time high in 2011, putting Mozambique in fifth place amongst countries receiving most FDI.

Portugal was the country whose companies invested most in Mozambique in the first half of this year with a total of 5 projects and one joint investment of US$116 million, according to figures from the Centre for Investment Promotion (CPI) to which Macauhub had access in Maputo.

In second and third places were South Africa and Mauritius, which respectively invested US$56 million and US$30 million, and China was ranked fourth with seven investment projects jointly valued at US$24 million. (macauhub)