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Standard Bank’s economic studies team has raised Mozambique’s growth forecast for 2017 from 3.8 to 4.1 percent due to increased raw material production and improvements in agriculture.
“The absence of military tension, a better outlook for agriculture and the expectation of a substantial increase in coal production, coupled with the proximity of a final investment decision in the ENI liquefied natural gas project, has led us to increase the prospects of GDP growth in 2017 from 3.8 to 4.1 percent,” reads the May report on African markets.
According to the document, which was sent to investors yesterday and to which Lusa has had access, the growth forecast for 2018 was also increased, from 4.4 to 5.7 percent, mainly because Standard Bank economists consider that, “although there is little growth outside primary activities, which represent more than 25 percent of GDP, aggregate demand may rise this year if the country continues to make progress on macroeconomic stability”.
The recovery, which Standard Bank expects to be led by the private sector, will benefit from a slowdown in inflation and lower interest rates, “which are likely to increase private consumption”.
On public finances, Standard Bank economists in Mozambique say that “the need to strengthen budget cushions and bring sovereign debt to sustainable levels should limit public spending in real terms, which opens the door to more private investment next year”.
The increase in the economic growth forecast, however, does not bring benefits regarding the budget deficit, where Standard Bank expects the government to fall short.
“It seems unlikely that the government will be able to meet the fiscal targets for 2017,” the document reads, adding that “the slow recovery of economic activity will probably result in lower tax revenues, at around 20.8 percent of GDP, against the 23.2 percent foreseen in the state budget”.Source: Lusa