Government’s growth target of 7% this year “challenging,” says Bank of Mozambique

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Government’s growth target of 7% this year “challenging,” says Bank of Mozambique

8:34 CAT | 18 Jan 2016

In file Club of Mozambique.

The Bank of Mozambique said on Tuesday that the government’s economic growth goal of 7 percent, with a 5.6 percent annual inflation this year, is “challenging”, noting that drought and floods may worsen the economic situation.

The position of the Bank of Mozambique in relation to key macroeconomic indicators set for this year by the Mozambican government was set out in a statement issued on Friday January 15 by the bank’s Monetary Policy Committee (MPC) at the end of its first 2016 meeting.

“The MPC has acknowledged the macroeconomic objectives for 2016, which set an annual inflation of 5.6 percent, a real GDP growth rate of 7 percent and an adequate level of international reserves, as challenging, in a context where drought and flooding in some regions of the country may increase the risks of the domestic economic environment,” the press release reads.

The statement goes on to say that projections by the Mozambican authorities are even more demanding given the weak recovery of global economic activity, particularly in emerging market economies.

The MPC considers it necessary to enhance the coordination of monetary and fiscal policy in view of the 2016 goals as well as to make sectoral policies more effective, in order to strengthen the resilience of the Mozambican economy to external shocks.

The statement said that the country recorded gross domestic product (GDP) growth of 5.9 percent in the third quarter of 2015, down 1.9 percentage points compared to the same quarter in 2014, reflected the slowdown in economic activity in the primary and tertiary sectors, with stability in the secondary sector.

The primary sector grew by 6.3 percent against the 8.1 percent recorded in the same period of 2014, its slowing justified mainly by the poor performance of the mining industry, which grew only 8.7 percent after 63.2 percent in the third quarter of 2014. Agricultural production increased from 0.6 percent to 5.6 percent.

Citing data from the National Statistics Institute (INE), the MPC noted that, at 6 percent, annual inflation in 2015 was the highest in five years, and above the Mozambican government target of less than 5 percent.

The national currency, the metical, depreciated 42.25 percent against the dollar in 2015, reflecting a slowdown in devaluation, until November last year running at 73.2 percent.

“The slowdown of the metical’s depreciation reflected, in part, the package of measures adopted by the Bank of Mozambique aiming to restore stability,” the news release says.

The Bank of Mozambique MPC decided to hold key interest rates, fixing Standing Lending Facilities and Standing Deposit Facilities deposit rates at 9.75 and 3.75 percent respectively, and the Compulsory Reserves Coefficient at 10.5 percent.

Source: Lusa