Fitch Solutions has estimated that Mozambique’s gross domestic product (GDP) will grow 5.3 per cent this year and accelerate to 6.5 per cent in 2023, mainly due to investment in the natural gas sector.
“We anticipate that Mozambique’s real GDP will accelerate from an estimated 2.2 per cent in 2021 to 5.3 per cent in 2022, mainly driven by investments in physical assets, with the gas sector emerging as the main driver of investment flows into the country,” said Fitch’s latest analysis of the Mozambican economy.
In the report, analysts pointed out that “despite private consumption slowing this year due to the rise in inflation, which erodes the purchasing power of consumers, restrictions under the Covid-19 pandemic continue to ease, and this will increase consumption.”
For 2023, GDP growth is expected to accelerate to 6.5 per cent, “on the back of increases in liquefied natural gas production and exports,” Fitch added.
Looking at public finances, the consultancy forecast that the current account deficit will improve from 21.8 per cent of GDP in 2021, to 16.2 per cent this year, the lowest figure in the last 12 years.
“We forecast that the growth of exports of goods will outpace the growth of imports of goods, driving this notable improvement in the deficit,” the analysts explained, pointing to coal, aluminium and gas as the main raw materials to be exported.
In monetary policy, the Bank of Mozambique is expected to raise its key interest rate again by 50 basis points (0.5 percentage points) to 15.75 per cent at the end of the year.
“Inflation pressures will lead Mozambican policymakers to increase the interest rate, with the strengthening of economic growth allowing the central bank to maintain its interest rate at 15.75 per cent in 2023, as inflation slows and robust economic growth is maintained,” they argued.
On the violence in the north of the country and the impact on natural gas exports, Fitch Solutions estimated that exports will grow by 238.5 per cent, or more than three times the current rate, mainly due to Eni’s increased production at the project off the Mozambican coast.
“ExxonMobil is likely to reach a Final Investment Decision in 2023 and TotalEnergies is likely to resume the LNG project in 2023, which increases asset investments overall, which are expected to rise 7 per cent and contribute 3.4 percentage points to economic growth,” the analysts said.
The main risk of these forecasts, they admitted, is “the continued insurgent attacks in Cabo Delgado province,” whose current or future actions “may delay the development of the natural gas sector, potentially even encouraging other companies to suspend or cancel operations in the country, in addition to further delaying the resumption of TotalEnergies’ works and freezing the decision of other firms considering investing in the country, such as ExxonMobil,” they concluded.
