Standard Bank says Mozambique will grow less than 5.5% this year

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Standard Bank says Mozambique will grow less than 5.5% this year

12:14 CAT | 28 Mar 2016

Lusa (File photo)

Standard Bank’s economic studies unit said on Thursday that Mozambique will grow less than 5.5 percent this year, in a further slowing down, and with external difficulties exposing structural weaknesses in the country.

The bank’s March Economic Bulletin predicts “a slower GDP growth in real terms this year, with our initial expectation of around 5.5 percent most likely to be revised downwards, considering the increase of economic downturn risks”.

Standard Bank’s chief economist, Fausio Mussa, points out that structural reforms are urgently needed to compensate for the difficult economic situation the country is facing.

“It is expected that the country will remain exposed to the negative effects of the slowdown in foreign direct investment and the fall in export earnings, which resulted in the metical loosing nearly half its value against the dollar in 2015. Increasing political tension also reflects on expectations of a slowdown in economic activity,” in addition to the impact of climate change on agriculture, a sector that is worth 25 percent of GDP.

All these factors combined, says Standard Bank, make it “urgent to accelerate structural reforms and maintain more restrictive fiscal and the monetary policies to help manage macroeconomic imbalances”.

The National Statistics Institute of Mozambique recently reported a slowdown in GDP growth to 5.6 percent in the last quarter of last year, “resulting in a cumulative annual growth of 6.3 percent, against 7.4 percent in the previous year” as compared with the 7 percent that the government has optimistically set as this year’s goal.

“Although we hold good prospects for the national economy in the medium and long terms, supported by expectations of the development of natural gas projects in the Rovuma basin, difficult economic conditions resulting from the current situation are expected (in the short term), exacerbated by delays in the starting of these projects,” the bulletin reads.

Budgetary and economic difficulties recently led the government to propose to investors holding bonds of the Mozambican Tuna Company (Ematum) a buyback of the securities offering a higher annual interest rate (up from 6.3 percent to 10.5 percent) but extending the maturity to 2023, in time for tax revenues from natural gas to help the country balance the budget.

Source: Lusa