Mozambique: 2022 inflation forecast of 7.3%, central bank likely to raise interest rate to 14% – consultants

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Mozambique: 2022 inflation forecast of 7.3%, central bank likely to raise interest rate to 14% – consultants

8:53 CAT | 13 Jan 2022

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FILE PHOTO: Teixeira Duarte Construction

The Oxford Economics Africa consultancy forecasts that inflation in Mozambique will rise to 7.3% this year and that the central bank will raise the interest rate by 75 basis points to 14% this year.

“Given that we have significantly revised the inflation forecast for the 2022 average, from 5.4 percent to 7.3 percent, we also anticipate that the central bank will raise the benchmark interest rate by 0.75 points to 14 percent this year,” reads an analysis of price developments in Mozambique.

Analysts point out that “the consumer price index has faced inflationary pressures coming from the rise in oil prices and disruptions in the distribution chain, which were partly mitigated by modest domestic demand in the first half of 2021 and a stronger currency, compared to 2020.”

However, they add, “inflation accelerated to over 6 percent at the beginning of the fourth quarter of 2021, following upward adjustments to fuel prices,” which should, they conclude, have an impact on indices that measure the evolution of transport and electricity and gas prices “at least until the second half of this year.”

Mozambique ended 2021 with accumulated inflation of 6.74 percent, according to the Consumer Price Index (CPI) bulletin of the Mozambican National Statistics Institute (INE) with the pace of price rises over the 12 months of last year being above that of 2020, a year in which inflation had been set at 3.52 percent.

The categories of food and non-alcoholic beverages and restaurants, hotels, cafes and similar were those that contributed most to the rise in prices over the last year, according to the latest INE bulletin, released this month.

In relation to the Mozambican government’s projections, inflation announced by the INE was above the 5 percent that was expected for 2021, with the 2022 State Budget forecasting 5.3 percent.

According to the latest reports from the Bank of Mozambique, the main risks that may influence a rise in prices are related to the impacts of Covid-19, increased prices of foodstuffs and liquid fuels, along with constraints in the supply chain of goods on the international market.

Source: Lusa