Mozambique faces difficult situation but prospects are good in the medium term, says BPI

Login

Register

http://www.clubofmozambique.com/

Mozambique faces difficult situation but prospects are good in the medium term, says BPI

1:18 CAT | 28 Nov 2016

File photo

BPI bank’s economic and financial studies department believes that the medium and long-term economic outlook for Mozambique is positive, despite the difficult situation the debt crisis is currently inflicting.

“Although the short-term outlook shows signs of slowing down, the medium and long term remain favourable,” Vânia Duarte, a BPI analyst who follows the Mozambican economy told Lusa.

Duarte explains that the country “faces a complicated situation today, which is fundamentally due to the breakdown of the virtuous cycle of trust that fed the relationship between the country and international institutions and donor countries”.

In April, the Mozambican government admitted about US$1.6 billion in hidden debts, prompting the suspension of international financial support and the collapse of donor trust.

This breach of trust becomes more problematic due to international currencies flows, whose “interruption or fall results in the unavailability of foreign exchange for international payments, as a consequence of the reduction of imports, less availability of goods in the domestic market and their respective price increase, in addition to the impacts along the entire production chain”.

Anticipating “low economic growth” for this and next year, the BPI study team, led by chief economist Paula Carvalho, stresses that “the performance of the international commodity markets may also dictate the evolution of activity, namely foreign direct investment in the country”.

There are other important factors. “The political-military tension in the country hinders the normal circulation of goods and services, and agricultural production was affected this year by adverse weather conditions,” the report says.

Despite the difficulties, the department of economic and financial studies maintains a positive outlook on the country. “Despite the short-term outlook showing signs of slowing down, the medium and long term remain favourable, taking into account expectations regarding the development of natural gas projects in the Rovuma basin and the potential that this will bring to the country, in addition to the agricultural potential and existing wealth of other natural resources, including coal,” Duarte says.

Source: Dinheiro Digital, Lusa