Mozambique to grow only 4.8% this year – EIU

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Mozambique to grow only 4.8% this year – EIU

1:50 CAT | 11 Apr 2016

The Economist Intelligence Unit (EIU) believes that Mozambique’s economy will grow only 4.8 percent this year, due to the slowdown in public spending and investment and the impact of the weather on agricultural production.

“The real growth of gross domestic product is expected to be 4.8 percent in 2016, the lowest growth rate in the last 15 years,” reads an economic analysis of Mozambique that Lusa has access to.

“The expected slowdown reflects a further decrease in public spending, low investment in the country and the negative impact on agricultural production of drought and floods related to the El Niño weather phenomenon,” the British magazine’s expert economic analysis unit adds.

In addition to the downward revision to GDP growth for this year, the EIU has also lowered the average expected increase from 6.8 percent a year between 2017 and 2020 to 5.8 percent on market forecasts of raw materials prices expecting to remain low.

“Over-supply and low demand in the global market will reduce new capital investments in the coal industry in Mozambique and tie the development of new exploration of graphite, titanium and gold,” the EIU says, while noting that “because of low operating costs and relatively robust demand from India, the main Mozambique export market, coal production should increase by the end of the decade”.

The EIU’s analysis of the Mozambican economy predicts that inflation will continue to face pressure, accelerating to a five-year high of nearly 13 percent this year.

“Inflation should slow gradually from there due to rising oil and food prices in 2017 and 2018,” the unit adds, concluding that “inflation should fall to an average of 5.1 percent in 2020, helped by a progressively smaller budget deficit and a more stable currency”.

Source: Lusa