Mozambique to suffer 0.9% recession and substantial job losses – Standard Bank

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Mozambique to suffer 0.9% recession and substantial job losses – Standard Bank

1:08 CAT | 01 Jun 2020

Maputo. [File photo: Visao]

Standard Bank’s economic studies department says that the Mozambican economy will register negative economic growth of 0.9% this year, recovering in 4.2 to 20% in 2021, and will also witness “substantial job losses”.

“The risk of a recession this year has increased because the pandemic has slowed investment, especially foreign investment and that associated with the implementation of natural gas projects, putting significant pressure on the balance of payments and the state budget,” write the bank’s analysts, warning of a substantial loss of jobs which “will further depress consumer demand, whose sentiment is already negatively affected by security challenges in the centre of the country and violence in the north”.

In their most recent report on African economies, to which Lusa has had access, the analysts write that the 0.9% recession this year could reach 2.5% in the most pessimistic scenario, although in both cases 2021 growth is forecast to be above 4%.

“We see growth accelerating above 4% from 2022 onwards with the Coral and Area 1 projects reaching critical implementation phases, well after the final investment decision for the Rovuma project,” the analysts write.

On the budget front, Standard Bank warns that there are “substantial risks” arising from the need to secure the US$700 million (€630.2 million) in aid envisaged by the government.

“The International Monetary Fund (IMF) has already made available US$309 million [€278 million] under the Rapid Credit Facility (RCF), having already given US$15 million to cover debt service from April to October this year,” the analysts recall.

The Standard Bank document adds that the European Union has collected €110 million in support, it being foreseeable “that the World Bank and other donors [will] contribute to closing the missing amount to make up to the US$700 million in emergency aid requested by the Mozambican government”.

Source: Lusa