Mozambique: Fitch now sees economy shrinking 0.7% this year, growing 4.9% next

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Mozambique: Fitch now sees economy shrinking 0.7% this year, growing 4.9% next

8:06 CAT | 27 Nov 2020

File photo> Lusa

Fitch Solutions, a consultancy that is part of the same group as credit ratings agency Fitch Ratings, has revised its forecast for Mozambique’s economic growth this year, forecasting a contraction of 0.7%, rather than the 0.2% growth that it had been projecting before the effects of the Covid-19 pandemic became clear.

In a report sent to customers that Lusa has seen, analysts warn that the effect of rising unemployment and the persistent fear among consumers of contracting the novel coronavirus that causes Covid-19 will limit the recovery of private consumption at least until the end of this year, and that this is being coupled with a collapse in tourism and mining exports.

The document predicts a recovery in domestic demand in 2021 that will help drive 3.6% growth in gross domestic product, despite net exports failing to pick up and so remaining an obstacle to a more energetic recovery.

The report from Fitch Solutions notes that Mozambique’s economy contracted by 1.1% in the third quarter of this year, having contracted by 3.3% in the second quarter, after a “modest expansion” of 1.7% in the first quarter.

According to data from the National Statistics Institute that was released this week, Mozambique in the third quarter entered a technical recession, registering two consecutive quarters of negative growth.

Although the Fitch analysts state their belief that the second quarter marked the lowest point of economic activity this year, they write that indicators point to a weaker recovery in the second half than previously forecast.

For next year, Fitch Solutions forecasts GDP growth of 3.6%, partly underpinned by a recovery in private consumption, which in 2021 as a whole is set to expand by 4.9%.

On Covid-19 vaccines, analysts estimate that although several should be approved by the end of this year or early next year, they will not reach emerging markets until the second quarter of 2021 – and Mozambique in the second half of next year.

Source: Lusa