Mozambique: Oxford Economics revises economic growth to 3.8% this year

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Mozambique: Oxford Economics revises economic growth to 3.8% this year

2:30 CAT | 25 Aug 2022

File photo: Lusa

Consultancy Oxford Economics Africa will revise Mozambique’s growth to close to 3.8% this year, after the second quarter recorded a rate of 4.7%, the highest since 2018.

“Economic growth in Mozambique increased in the second quarter for the sixth consecutive quarter and reached the best growth rate since the second quarter of 2018,” reads a commentary on developments in the Mozambican economy between April and June.

“We currently forecast GDP [gross domestic product] to accelerate from 2.2 percent in 2021 to 3.4 percent in 2022, but the latest GDP figures have surprised us on the positive side, and so we will revise our estimate to close to 3.8 percent,” the note, to which Lusa had access, reads.

The trend of increased mineral exports should be maintained, added the analysts, who said that “investments in infrastructure to expand the power grid and rebuild damaged infrastructure in Cabo Delgado will sustain economic growth this year.

The Mozambican economy has sedimented the growth from the start of the year, “with all industries recording higher growth in the second quarter,” more than doubling the annualised growth rate in the second quarter, which this year was 4.7 percent when in the same period last year it was 2.4 percent.

The revision of Oxford Economics Africa’s estimates comes just days after the announcement of a stimulus package to the economy by the Mozambican government.

The Mozambican president announced on 9 August a package of 20 measures to stimulate the economy, including a 22 percent cut in the Corporate Income Tax rate (IRPC) and a percentage point reduction in Value Added Tax (VAT).

The 20 measures are part of the SAP – Stimulus Package for the Acceleration of the Economy, which Filipe Nyusi disclosed in a communication to the nation, aimed at responding to the needs of the country’s growth, the negative impact of the Russia-Ukraine war, armed violence in Cabo Delgado province, northern Mozambique, and natural disasters.

The measures announced lower the IRPC from 32 percent to 10 percent in agriculture, aquaculture and public transport, and the VAT from 17 percent to 16 percent in agriculture and renewable energy.

The Mozambican head of state also pointed to the introduction of tax incentives for new investments over the next three years, but did not give the rates of these incentives.

Source: Lusa