Mozambique recovers from 1.3% contraction in 2020 and grows 2.8% this year – Fitch Solutions

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Mozambique recovers from 1.3% contraction in 2020 and grows 2.8% this year – Fitch Solutions

8:18 CAT | 06 Sep 2021

File photo: Lusa

Consultancy Fitch Solutions expects the Mozambican economy to accelerate to a 2.8% growth this year, well below the 5.5% average of the last decade, but recovering from last year’s 1.3% contraction.

“We expect Mozambique’s GDP to grow 2.8% this year, and that the government will not implement containment measures as harsh as those applied in the second quarter,” reads a comment on the data released by the National Institute of Statistics (INE) in Mozambique at the end of August, which show growth of 2% in the second quarter of this year, following expansion of only 0.1% in the first three months of the year, both compared to the same period of the previous year.

The comment, sent to consultancy clients, says that, due to the slowdown in containment measures, “conditions in the labour market will continue to improve gradually, strengthening the disposable income of families and consumer confidence, which will lead to a moderate recovery in private consumption”.

Public spending will also increase, the analysts add, particularly in the fight against insecurity in Cabo Delgado and in the purchase of vaccines against the Covid-19 pandemic, which will encourage economic activity.

In addition to public spending, the recovery in Mozambique’s main exports also supports the forecast for economic recovery this year.

“National coal production is expected to recover from a 16.9% contraction in 2020 to a 10.6% growth, with the main miners resuming operations, and aluminum prices are also expected to register a strong increase, from US$1,731 per tonne to US$2,300 this year, supporting a robust recovery in exports this year,” the analysts point out.

On Monday of last week (August 30), the INE announced that GDP grew 1.97% in the second quarter of this year against the same period in 2020.

It is the second consecutive quarter of growth, after a 0.12% rise in the first quarter of 2021, signalling a recovery from the crisis caused by the Covid-19 pandemic.

“The performance of economic activity in the second quarter of 2021 is attributed in the first place to the tertiary sector, which grew by 2.82%, with greater emphasis on the Hotel and Restaurant sector with a variation of 4.03%,” the INE wrote.

The State Budget for 2021 foresees economic growth of 2.1%, but the document was approved at the end of 2020, three months before the indefinite suspension of the TotalEnergies natural gas project in Cabo Delgado as a result of insecurity in the north of the country.

Source: Lusa