Mozambique: Climate, terrorism main threats – Fitch Solutions

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Mozambique: Climate, terrorism main threats – Fitch Solutions

4:00 CAT | 23 Mar 2022

The consultancy Fitch Solutions said on Wednesday, in its report analysing Mozambique’s economy in the long term, that climate change and violence in the north are the main threats to the country’s economic development.

“Mozambique is vulnerable to extreme weather events, especially floods and droughts, and this will continue to put the agriculture-based economy at risk,” said the report, which also pointed out that “ongoing Islamic insurgencies threaten to delay the development of the country’s liquefied natural gas sector,” which is crucial for the country.

The document, sent to clients by this consultancy owned by the same owners of the financial rating agency Fitch Ratings, confirms the improvement in the estimate of economic growth to 5% this year, above the average of 4% recorded between 2015 and 2019 and more than double the 2.1% recorded last year.

“We anticipate a strong economic recovery in Mozambique this year, with the easing of social distancing restrictions increasing private consumption, while a more stable security environment provides an increase in investment, particularly in the hydrocarbon sector,” the analysts wrote in the report to which Lusa had access, and which contains the 10-year forecasts.

The current account deficit will decrease, from 21.7% of gross domestic product (GDP) in 2021 to 15.7% this year, the lowest imbalance since 2009, according to the analysts, who pointed out that this improvement “will be mainly driven by the strong performance of exports, including of liquefied natural gas.”

However, they warned, “Mozambique’s external position will remain fragile in the short term, as financial flows are not yet sufficient to cover this high imbalance, which puts pressure on foreign reserves.

They added that the Mozambican currency would remain stable this year, averaging 63.92 meticals per dollar this year, with rising aluminium and cooking gas prices and gas exports, offsetting the negative impact of negative sentiment arising from Russia’s invasion of Ukraine.

“By 2023, we anticipate a slight depreciation of 1.7% in the value of the metical against the dollar, to average 65 meticals per dollar due to the decline in aluminium prices and lower value of coal exports,” the analysts concluded.

Source: Lusa