Mozambique: TotalEnergies’ return this year, expected to drive inflation to 8.8% in Q4 – Oxford Economics

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Mozambique: TotalEnergies’ return this year, expected to drive inflation to 8.8% in Q4 – Oxford Economics

2:05 CAT | 14 Jul 2023

FILE - For illustration purposes only. [File photo: TotalEnergies]

Oxford Economics said on Thursday that inflation in Mozambique, after falling to March 2022 levels,will rise to 8.8% in the last quarter of the year, driven by TotalEnergies’ return to Cabo Delgado.

“We anticipate that TotalEnergies will restart construction of the Afungi LNG Park in Cabo Delgado in the second half of this year, which will significantly increase imports, which in turn will put pressure on foreign currency reserves, prompting the Bank of Mozambique to abandon the current ‘de facto’ peg in the last quarter of the year,” the analysts write in a commentary on June inflation.

In the note sent to investors and to which Lusa had access, Oxford Economics wrote that “the consequent depreciation of the metical exchange rate will increase the prices of imported goods, such as food products, and bring inflation to 8.8% in the fourth quarter”.

The analysts’ comment comes just days after the release of June’s price increase, which rose by just 1.4 percentage points to the lowest level since March 2022.

“Although inflation fell below 7% year-on-year for the first time since October 2021, we expect the rate to start rising gradually in the last quarter of the year due to imports needed to restart the TotalEnergies project and the depreciation of the metical,” the analysts concluded.

One-year inflation in Mozambique fell to 6.81% in June, according to data released on Tuesday by the National Statistics Institute (INE), the lowest in 14 months.

“The reduction in inflation in June is explained by the fall in the price of cereals on the international market and the greater domestic supply of fruits and vegetables,” reads the report on INE’s Consumer Price Index for June 2023, consulted by Lusa.

Last May, the one-year inflation rate in Mozambique had reached 8.23%, which according to INE, was then the lowest value (monthly growth) in 13 months.

Compared to the previous month, May, the monthly rate of change in inflation in Mozambique fell 0.58%, but the accumulated since the beginning of the year points to an increase of 2.57%, according to INE’s record.

Source: Lusa