Mozambique to rebound slightly and grow 4.2% this year – EIU

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Mozambique to rebound slightly and grow 4.2% this year – EIU

11:23 CAT | 23 Feb 2017

The Economist Intelligence Unit (EIU) believes that Mozambique’s economy will recover this year and grow 4.2 percent, after having registered its lowest growth in the last fifteen years last year.

“We expect that, after reduced growth in 2016, with the lowest value in the last 15 years, GDP will recover slightly to 4.2 percent in 2017, based almost exclusively on the minerals sector,” analysts at the unit of economic analysis of the British magazine The Economist say.

Mozambique’s economy slowed growth last year to 3.3 percent, half of what it had grown in the previous year, according to preliminary data from the local National Statistics Institute (INE).

In the analysis of the Mozambican economy, the EIU says that the coal industry is expected to grow significantly due to “firmer international prices, relatively robust demand in India (the main Mozambican export market) and the efforts of mining companies in 2015 and 2016 to increase productivity”.

Despite this positive outlook, Economist economic analysts warn that economic headwinds still persist, citing “budgetary austerity, the scarcity of external reserves and high inflation, which will shrink domestic demand, and financial volatility and political risk which will lead to an additional drop in investment”.

For the following years, the EIU anticipates that the Mozambican economy will be able to “recover gradually”, at the cost of improvements in macroeconomic stability and with the recovery of market confidence.

“However, at an average of 5.1 percent between 2018 and 2021, real GDP growth will continue well below the average of 7.3 percent per year between 2005 and 2015,” the analysts conclude.

On inflation, which reached a record high of 27 percent in November last year, the expectation of the Economist analysts is that the rate will go down, but is expected to remain above 23 percent this year.

“Supported by a contractionary fiscal policy, a smaller budget deficit and more stable global prices, we expect inflation to fall from there to an annual average of 5 percent by 2021,” the EIU experts conclude.

Source: Lusa