Mozambique: Business performance slips in the first quarter

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Mozambique: Business performance slips in the first quarter

12:51 CAT | 28 Apr 2022

Photo: CTA on Facebook

Private business performance dropped in the first quarter of 2022, the Business Robustness Index (IRE) released by the Confederation of Economic Associations of Mozambique (CTA) in Beira, Sofala province, this Wednesday (27-04) reveals.

At an economic briefing in Beira, the CTA reported that the IRE had fallen 2% from 29% in the fourth quarter of 2021 to 27% in the first quarter of 2022.

CTA president Agostinho Vuma explained that the drop reflects the combined effect of the impact of natural disasters in the first quarter; the increase in inflation (which reduced the real interest rate); and the increase in raw material costs, especially crude oil, wheat, and crude cooking oil, largely explained by the conflict between Russia and Ukraine.

“However, these factors were counterbalanced by the positive impact of the relief of Covid-19 counter-measures during the first quarter, which had its maximum exponent with the declaration by the President of the Republic of the end of the State of Public Calamity last week,” Vuma noted.

Speaking to an audience of entrepreneurs and government officials in Sofala province, the CTA president also reported a 10.9 point drop in the employment trends index, from 125.9 to 115.0, which reveals both that obtaining a job in Mozambique was more difficult than in the fourth quarter of 2021, and that Mozambican companies were more willing to hire temporary workers than to hire permanent staff.

“As for the macro-economic environment index, our assessment shows that this indicator dropped from 50% to 49%, essentially reflecting the acceleration of the general level of prices, in a context of exchange rate stability and reference interest rates. Therefore, our analysis concludes that, in the first quarter of 2022, there was a contraction in business performance, a fact that requires measures to be taken to ensure the desired business recovery,” Vuma said.

For the second quarter of 2022, the CTA expects an improvement in the macroeconomic environment on the back of the start of agricultural marketing, the resumption of the International Monetary Fund program, and continuing exchange rate stability, which could dampen the rise in import prices.

The CITA also foresees an increase in business confidence due to the improvement in the security situation in Cabo Delgado and the completion of the project to export Liquefied Natural Gas from the Coral South FLNG project from mid-2022.

However, the CTA notes that the materialisation of these prospects will be conditional on factors such as possible increases in fuel prices, which will translate into higher costs for companies; the prolongation and deepening of the Russia-Ukraine conflict; and an increase in the cost of financing, after the Bank of Mozambique raised the MIMO rate to 15.25% in March.

By Evaristo Chilingue

Source: Carta de Moçambique