Mozambique: Credit growth set to accelerate to 8.4pct in 2023 – Fitch Solutions

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Mozambique: Credit growth set to accelerate to 8.4pct in 2023 – Fitch Solutions

6:51 CAT | 04 Jan 2023

File photo: Lusa

The concession of loans in Mozambique grew by an estimated 5% in 2022, and is set to swell by a further 8.4% this year, below the average growth of the previous decade, of 11.4%, according to Fitch Solutions, a financial consultancy.

“We see credit [interest] rates falling during 2023, encouraging borrowing by households and businesses; at the same time, we anticipate that the slowdown in credit on domestic public debt will reduce government intervention, giving banks more room to lend to the private sector,” write the analysts at the consultancy, which is part of the same group as credit rating agency Fitch Ratings.

In a note on the evolution of bank credit, sent to clients and which Lusa has seen, Fitch Solutions notes that, even with the forecast growth of 8.4% this year, growth in loans “will remain below the historical average of 11.4% between 2012 and 2021, which is linked to the fact that the relatively high rate of non-performing loans is keeping banks cautious when it comes to lending money.”

The increase in loans to customers is also related to the foreign aid that has been available to Mozambique in recent quarters, first with the financial agreement reached with the International Monetary Fund last May for $456 million (€433.2 million), and then with the grant of $300 million (€285 million) from the World Bank in July.

According to Fitch Solutions, lending volume is estimated to have risen by some 5% last year to 279.9 billion meticais (€4.1 billion), from 266.6 billion meticais (almost €4 billion) in 2021.

“In 2023, we see loan growth accelerating to 8.4%, and we anticipate that inflation will slow from an average of 9.5% in 2022 to 8.3% this year, which means that interest rates should fall in 2023, mainly because the Bank of Mozambique will continue to keep its key rate at 17.25%, encouraging a rise in borrowing by households and businesses,” the note concludes.

Source: Lusa