Africa Economy FA Finance Mozambique

Mozambique surprises with GDP growth expected in 2020

IHS Markit, a consultancy firm which covers Mozambique, told news agency Lusa that it has reviewed its economic forecasts for the country last year, now expecting a 0.2% growth and not a 2% recession as previously estimated.

“Mozambique’s GDP should have grown by a modest 0.2% during 2020, which compares with our previous estimate of a 2% contraction,” said Thea Fourie in statements to Lusa, in which she explained that the review is linked to the evolution of economic activity during the first half of the year.

“Economic growth exceeded initial expectations and fell 0.8% during the first half of the year, better than the forecast of a 2.2% drop from January to June,” said the analyst, pointing out that it was agriculture that ‘ saved ‘the country from recession.

“The isolation measures taken due to covid-19 at the end of March and disturbances in supply chains put many sectors under pressure during the second quarter, but agricultural production, which accounts for almost 30% of GDP and is dominated by agriculture from subsistence, remained resilient and grew 3% during the first six months of 2020 “, said the analyst.

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In addition, she added, the Mozambican economy should have some sectors growing steadily while others remain in a path to recovery:

“Although the overall growth in the third quarter was below potential, activity in some sectors of the economy may start to recover, while others, like agriculture, will remain resilient “, she said.

Asked about the evolution of negotiations with the International Monetary Fund (IMF), which were interrupted due to the pandemic and resumed at the end of the year, Thea Fourie said that “IHS Markit assumes that relations with Mozambique have improved since 2019, when the Government joined to the Fund’s requirements, and guaranteed the resumption of financial assistance “, but did not take for granted the adoption of a financial assistance program, as Mozambique has argued.

The country has already received funds from the IMF in several occasions: on April 13, Mozambique benefited from financial support from the Catastrophe Containment and Relief Trust (CCRT), joined the Debt Service Suspension Initiative (DSSI), and in April, the IMF disbursed US$309M under the Rapid Credit Facility.

“The budget deficit in 2020 should be above the initial estimates of 10.4% and end the year of 2021 at 11.7%”, considered the analyst, concluding that “the public expenditure related to combating covid-19 together with the growing humanitarian needs of people displaced by terrorists in the province of Cabo Delgado will compound the deficit in 2020”.

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