Mozambican economic growth is increasing faster than expected, according to Ricardo Velloso, head of an International Monetary Fund (IMF) team that visited the country at the end of June.
In a statement released after the visit, Velloso said “the Mozambican economy is recovering gradually”.
Real GDP growth reached 3.75% in 2017, which is 0.75% higher than the IMF had predicted. Economic growth is being supported by a stronger-than-expected recovery in agriculture and significantly higher mining production.
Inflation has declined rapidly, from a peak of 26% (year-on-year) in November 2016 to about 6% (year-on-year) in June, reflecting tight monetary policy, exchange rate stability, and decelerating food price increases.
Strong export performance and subdued import growth have helped narrow the external current account deficit, supporting a large accumulation of international reserves, which at the end of June covered about 6.6 months of next year’s projected non-megaproject imports.
“On the fiscal front, the government took important measures that helped contain the fiscal deficit: subsidies on fuel and wheat were eliminated, an automatic fuel price adjustment mechanism was adopted, and electricity and public transportation prices were increased”.
Interest rates have been reduced by the Bank of Mozambique since April 2017. “The near-term outlook is of gradual and broad-based recovery in economic activity and subdued inflation. Real GDP growth is projected in the range of 3.5% to 4% in 2018, picking up to the range of 4% to 4.5% in 2019.
“This recovery is expected to be supported by further declines in interest rates given the benign inflation outlook,” says Velloso. An FTW team will be in Mozambique in September to find out first-hand about developments. For inquiries email: yolandel@nowmedia.co.za.
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The near-term outlook is of gradual and broad-based recovery in economic activity and subdued inflation. – Ricardo Velloso
