Mozambique GDP growth to accelerate in 2023-25

Mozambique´s GDP growth is set to accelerate in 2023-25, with the economy´s post-pandemic recovery gaining momentum and benefiting from the start of off-shore natural gas production, according to Eaglestone Securities.

“Economic activity is expected to continue to improve in 2023 thanks to a recovery in those sectors that were more impacted by the Covid-19 pandemic, namely tourism, construction and transports and communication”, Eaglestone says in its most recent report on the Mozambican economy.

“The extractive industry will also see a sharp recovery, boosted by the start of production of LNG in the Coral South
Project in the Rovuma Basin in Q4 2022”, it adds.

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The government’s 2023 budget proposal assumes that real GDP growth will improve to 5.0% (from an upwardly
revised projection of 3.8% in 2022) while average annual inflation is expected to increase from 10.7% in 2022 to 11.5% this year. The authorities also expect growth to accelerate in the medium-term, reaching 8.3% in 2024 and 6.0% in 2025.

The government remains committed to the consolidation of fiscal accounts, ensuring that its implementation will safeguard economic growth and the sustainability of public accounts in the medium-term.

“As a result, the authorities will prioritize the implementation of measures to rationalize public spending and deepen reforms to diversify revenue sources. Another key priority is the management of public debt, including the creation of mechanisms to better manage state-owned enterprises. Theaim is to gradually reduce public debt to more sustainable levels over the mediumterm”, Eaglestone adds.

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“The Mozambican government is banking on the continued improvement in economic activity in the country, together with the reforms that are being implemented to help raise public revenues and the measures to try to contain expenditures, to ensure the sustainability of public finances”, the consultancy adds.

Eaglestone also points to “significant risks to the country’s outlook”, including from adverse climate events and the fragile security situation.

“As a result, fiscal consolidation and narrowing the fiscal deficit gap remains crucial to bringing the public debt ratio lower in the medium-term. Reducing foreign exchange volatility will also be important, especially considering that nearly three-fourths of public debt is external debt and is denominated in foreign currency”, the report states.

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“It remains to be seen whether the Mozambican authorities will take advantage of the better outlook expected ahead to continue to push through the necessary structural reforms that will help promote sustained economic growth and increase resilience to external shocks”, it adds.

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