Mozambique Economic Update
Resilience on the path to improvement
There is an aura of optimism going into the tail-end of 2017 that Mozambique is on the road to improvement. Real GDP growth is recovering, inflationary pressures are receding, and the central bank has commenced a more accommodative monetary policy cycle. Given its vast natural resources, fallout from the external debt crisis is expected to be a challenge only in the short term. Investor interest has proven to be resilient, with the natural gas sector in particular projected to assist in getting Mozambique over the debt hurdle.
Key takeouts from this report
- Pockets of political volatility: Mozambique has enjoyed relative political stability since its extended civil war ended some two-and-a-half decades ago. However, tensions from Mozambique’s volatile political past continue to raise their head on a sporadic basis, but is unlikely to escalate into a serious rebellion.
- Economy starting to shake off debt crisis consequences: As one of the fastest-growing economies on the continent over the last two-and-a-half decades, the southern African country has outperformed both regional and global growth averages. Although the external debt crisis slowed economic expansion in 2016, the consensus among international agencies is that Mozambique’s economic prospects are positive.
- Investment flows falling but set to recover: Even in the aftermath of the external debt scandal and lacklustre global demand for Mozambique’s commodities, the country still received significant foreign direct investment (FDI) inflows in 2016. Looking ahead, the natural gas sector is projected to be the primary receiver of FDI inflows, as well as the major driver of the country’s economic expansion prospects.
- Risks and challenges: Mozambique faces structural challenges, with inadequate infrastructure constraining economic development. Yet, the largest immediate hurdle, from an economic perspective, is the ongoing fallout from the external debt scandals.
What our experts say
Already impressive FDI inflows to Mozambique should increase even further if the government manages to successfully implement reforms that improve the country’s competitiveness.
Call to action
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