Mozambique: Standard Bank revises economic growth to 3.5% and inflation to 6.2% on the wake of Cyclone Idai

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Mozambique: Standard Bank revises economic growth to 3.5% and inflation to 6.2% on the wake of Cyclone Idai

12:58 CAT | 04 Apr 2019

Photo courtesy: Further Africa

Standard Bank has revised its Mozambique growth forecast down from 3.7% to 3.5% as a result of Cyclone Idai, and increased its inflation estimate from 5% to 6.2%.

“While it is still too early to fully assess the negative impact of Cyclone Idai, we have lowered our forecast for this year’s GDP growth to 3.5%, from 3.7%,” Standard Bank’s chief economist Fáusio Mussá said.

Speaking to Lusa following the release of the Purchasing Managers’ Index (PMI), which measures the financial capacity of manufacturing companies, Mussá said that “the 12-month average inflation forecast this year was increased to 6.2 %, from 5.0% “, in line with Bank of Mozambique’s outlook, which foresees a price increase of 6 to 7%.

“Our updated forecasts reflect an increase in the risks caused by the negative impact of Cyclone Idai, temporary pressures on liquidity in foreign currency and foreign exchange, and by possible fiscal pressures due to the general elections which had until recently remained very discrete,” he said, adding that “the Government is pondering a rectifying budget to accommodate the impacts of the cyclone”.

Standard Bank explained that the improvement in the PMI Index from 50 to 50.4 points “did not reflect the negative impact of Cyclone Idai, which hit the provinces of Sofala and Manica”, where “floods left hundreds of thousands of people homeless, as well as seriously damaged infrastructure throughout the region, and the number of deaths continues to increase”.

However, “the final investment decisions regarding the Rovuma basin natural gas projects are expected to take place soon, which will contribute to a positive sentiment and will support the economic recovery,” the economist said.

Cyclone Idai, which devastated part of the coast of south-west Africa on the 14 and 15 March, left more than 900 people dead in Mozambique, Zimbabwe and Malawi.

Source: Lusa