Mozambique Fiscal difficulties, foreign exchange liquidity hinder GDP growth – Consultancy

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Mozambique Fiscal difficulties, foreign exchange liquidity hinder GDP growth – Consultancy

11:54 CAT | 09 Jun 2025

File photo: Lusa

The Oxford Economics consultancy believes that the May drop in Mozambique’s Purchasing Managers Index (PMI) index, which measures business activity in Mozambique, could be the first of many this year, due to instability and political risk.

“Fiscal difficulties and foreign exchange liquidity problems will continue to hamper Gross Domestic Product (GDP) growth in 2025,” write analysts from the African department of the British consultancy, pointing out that, “together with the political risk associated with new protests, these factors could result in further drops in the PMI, as business confidence wavers”.

In May, the PMI index of business activity in Mozambique recorded its first slowdown in four months, falling into negative territory, according to Standard Bank, which conducts the survey.

READ: Standard Bank Mozambique PMI: Business activity and new orders rise, but inventories fall

The PMI rose from 50.2 in March to 50.5 in April, remaining above the neutral value of 50 for the third consecutive month, but in May it fell to 49.6 points, according to the survey of companies, conducted by Standard Bank, which notes a “deterioration in business conditions”.

PMI indicators above 50 points point to an improvement in business conditions compared to the previous month, while indicators below this value show a deterioration.

The conclusions of the monthly survey show “a slowdown in the dynamism of the private sector in May, with operating conditions decreasing for the first time in four months”, while “production and new orders continued to increase”.

For Oxford Economics, “the recovery in the PMI in early 2025 was welcome after the economic deterioration resulting from violent political protests in late 2024”, and the agreement reached between the government and several opposition parties “may calm political tensions and avoid further disruption, but this is not guaranteed”.

Therefore, they conclude, “the possibility of new disruptions” such as those that occurred in the last quarter of last year, which paralyzed the country and left hundreds dead, “cannot be ruled out with certainty”.

According to the May PMI index, “growth rates have slowed, leading companies to reduce” the level of acquisitions and inventories, and “employment remained stable, overall, while the outlook for future activity remained strongly positive”.

Quoted in the study, Standard Bank’s chief economist, Fáusio Mussá, acknowledges “increased PMI volatility may signal a lack of growth momentum in the economic recovery from post-2024 general election fallout”.

“PMI data shows month-on-month expansions at a softer pace in output and new orders, and contractions in purchases and stocks, with no growth in employment, all leading to a decline in input costs,” Mussá observes.

Source: Lusa