EIU predicts 2.3% recession in Mozambique this year

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EIU predicts 2.3% recession in Mozambique this year

7:42 CAT | 05 Nov 2020

The Economist Intelligence Unit (EIU) consultancy predicts that the Mozambican economy will shrink 2.3% this year as a result of the coronavirus pandemic, recovering by 1.2% in 2021.

“In 2021, assuming the pandemic is under control, real GDP is expected to increase 1.2%, following an estimated 2.3% contraction in 2020,” the EIU note reads.

The experts in the economic analysis unit of the British magazine The Economist are of the opinion that “coal production will recover, because exploration is gradually accelerating, after almost stopping in 2020 due to the worldwide fall in demand for energy, and the agriculture sector remains strong, given favourable weather conditions”.

The EIU estimates that inflation will rise from 3.2% this year to 3.6% next year, driven by the increase in private consumption motivated by the lifting of restrictions, but the metical will continue to depreciate.

“We then expect inflation to accelerate until the end of our forecast period, reaching an average of 8% in 2025 due to widespread economic growth due to increased investments in gas,” the analysts write.

Regarding the government’s role in combating the Covid-19 pandemic, the EIU writes that “the Executive’s efforts have been generally ineffective in curbing the spread of the virus, and the crackdown on breaking the rules has ignited social tensions”.

“The Government is trying to reduce its own responsibility for containing the virus, pushing the burden on individuals, while giving priority to the resumption of economic activity,” the report continues. “With limited budgetary space to provide safety nets to the most disadvantaged, the risk of social instability will increase.”

Source: Lusa