Mozambique: Improvement of business conditions in April – Standard Bank

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Mozambique: Improvement of business conditions in April – Standard Bank

8:08 CAT | 05 May 2023

File photo: O País

Mozambican firms saw an improvement in business conditions for the third month running in April of this year, and to the greatest extent since July 2022, according to the latest Standard Bank Mozambique PMI survey.

“Having printed above the 50-benchmark level, the April PMI suggests that the economy continues to experience a gradual recovery in economic activity, recently impacted by cyclone Freddy,” the bank’s Chief Economist, Fáusio Mussá writes in a comment.

“A stronger rise in new business supported a quicker expansion in output and another elevated increase in employment. On the flip side, purchasing activity fell for the first time in three months amid some reports of cash-flow problems. Firms remained largely confident that activity will grow over the next year,” the report reads.

“The Standard Bank Mozambique PMI rose to 51.7 in April,” up from 50.9 in March, “a three-month straight increase, and the highest level since July 2022. This mainly reflects a sharp increase in new orders and continued recovery in output, which kept the employment sub-index in positive territory.”

“Improving operating conditions largely arose from a sharp increase in new business inflows, which expanded to the greatest degree in nine months. Companies seeing an improvement in sales on the month often related this to new clients and increased project work,” the PMI report notes.

At the same time, the survey points out, “output levels rose modestly and for the third month running, with the pace of expansion also ticking up to a nine-month high. increased productivity, new clients and higher demand underpinned the upturn, according to surveyed companies”.

The survey conducted by Standard Bank also found that, in April, “higher workloads supported a further increase in employment. Little changed since March, the rate of job creation was the second-fastest in a year and remained quicker than the series long-run average (since March 2015)”.

“The increased workforce helped companies reduce their backlog for the second consecutive month,” the report adds.

Commenting on the April survey report, Standard Bank’s Chief Economist notes that the PMI has remained above the reference level of 50, suggesting that the economy continues to show a gradual recovery from the shock caused by Cyclone Freddy.

“Despite growth resilience, the PMI suggests that firms are experiencing cash flow pressures, which would reflect ongoing tight monetary policy. There is also anecdotal evidence that part of cash flow pressures experienced by companies reflects government arrears and delays in VAT repayment. After all, the Treasury is facing pressures emanating from the wage bill reform,” the economist said.

Even so, Mussá notes, l, “the future expectations sub-index continued to rise, which confirms Standard Bank’s views that resumption of LNG investment could help accelerate growth from H2:23 and beyond”.

“There are also prospects of an increase in LNG investment. In a recent mining and energy conference in Maputo, ENI admitted the hypothesis of developing a second floating LNG platform.,” Mussá concludes.