Mozambique: Inflation seen at 3.0 pct as metical weakens – NKC African Economics

Login

Register

http://www.clubofmozambique.com/

Mozambique: Inflation seen at 3.0 pct as metical weakens – NKC African Economics

4:13 CAT | 13 Oct 2020

in file CoM

The inflation rate in Mozambique is set to be 3.0% in 2020, up slightly from the 2.8% seen in 2019, in part due to a 14% depreciation of the metical so far this year, according to NKC African Economics.

“We envisage inflation to increase only slightly in 2020, as currency weakness and import supply-chain disruption due to the impace of the Covid-19 pandemic will largely be offset by lower fuel prices and weake domestic demand,” the consultancy’s analysts write in a note.

That, they add, means there is scope for the Bank of Mozambique to lower its benchmark lending rate by another 100 to 150 basis points by the end of this year, given the economic crisis and relatively high interest rates.

Last month, consumer prices in Mozambique rose 0.3%, leaving them up 3.0% on September of last year – the biggest year-on-year rise since May, according to data released by the country’s National Statistics Institute.

The metical has depreciated by 14% since the start of this year, amid falling prices for the raw materials that Mozambique exports and global risk aversion, the NKC analysts note.

Mozambique is a net importer of most consumer goods, “so a weaker currency is strongly associated with higher prices for consumers,” they stress, noting that the regional drought in the south of the country and the continuing conflict in Cabo Delgado, in the north – which has already displaced over 300,000 people – should also increase food insecurity and push up food prices.

Source: Lusa