3.25% fall in GDP a positive, improves forecast for Mozambique – Oxford Economics

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3.25% fall in GDP a positive, improves forecast for Mozambique – Oxford Economics

3:16 CAT | 20 Aug 2020

File photo: Lusa

The Oxford Economics consultancy said on Wednesday that Mozambique’s 3.25% fall in gross domestic product (GDP) in the second quarter showed more resilience than expected in the construction and agriculture sectors, and should prompt a revision of the previous 2.8% recession forecast.

“We were expecting a contraction close to 10% in the second quarter compared to the same period of last year, much worse than the [just announced] preliminary estimate of 3.3%, due mainly to the construction and agriculture industries holding up better than expected in view of the confinement motivated by the Covid-19 pandemic,” the Oxford Economics analysis of the figures released on Tuesday by the National Statistics Institute (INE) reads. The figures show the worst quarter since at least 2007.

“The current forecast of a 2.8% contraction in 2020 is expected to be revised upwards, but the figures for the second quarter may be cancelled if the recovery is not as easy as previously predicted,” the analysis continues.

The note sent to customers, to which Lusa has had access, warns that “the continued absence of coal exports will be a great loss for the economy, since these exports represent about 30% of the total”. They point out, however, that the Government’s commitment to expanding the supply of sustainable energy supports economic growth.

In the Oxford Economics assessment, “the relaxation of some restrictions related to Covid-19 as from July should also improve activity in the services sector, although the hotel and restaurant industry will probably not recover this year, not only because of the lack of international tourism, but also due to fears of terrorist attacks in the province of Cabo Delgado”.

Mozambique’s economy contracted by 3.25% in the second quarter compared to the same period last year, as against 1.68% growth registered in the first quarter, according to the INE.

“The negative performance of economic activity in the second quarter of 2020 is attributed primarily to the tertiary sector, which decreased by 4.06%, with greater emphasis on the Hotel and Restaurant business with a variation of minus 35.84%,” the INE website reveals.

According to the INE, these two sectors are followed by “Trade and Repair Services with minus 5.69% and Transport and Communication with around minus 4.68%”.

As to the reasons cited for the drop in the GDP, “the primary sector occupies the second position with a variation of minus 2.65% induced by the branch of Extractive Industry with minus 25.55% followed by the branch of Fisheries with minus 1.83%”.

“However, agriculture had a positive variation of 3.53%,” the INE adds.

Source: Lusa