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Security situation and pandemic lower Mozambique’s growth forecast to 1.8% – Standard Bank

The Standard Bank’s economic studies unit yesterday revised its growth forecast for Mozambique’s economy this year downward to 1.8% in response to the security situation in the north of the country and the effects of the Covid-19 pandemic.

“We are lowering our 2021 GDP forecast from 2% to 1.8% this year as the pandemic and internal security challenges are likely to continue to worsen sentiment and economic recovery,” the unit’s analysis of various African economies reads.

According to the report, the adverse risks in the country, including violence in Cabo Delgado, attacks on civilians in Sofala and Manica and the abduction of businesspeople, are worsening its economic growth outlook.

“Our base scenario now incorporates slower growth due to risks, and in some quarters the scenario was 2 percentage points lower, reflecting a possible delay in the implementation of the US$20B [about €16.5B] project led by Total, whose first export (of liquefied natural gas) is expected to take place in 2024,” the document declares.

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In addition to the attacks that forced Total to significantly reduce the number of workers at the natural gas project construction site, “the acceleration of Covid-19 infections, which have entailed the introduction of new containment measures, may also delay economic recovery,” the analysts warn.

The acceleration of private investment outside the natural resources sector may spur more balanced and inclusive economic growth, but this is unlikely, at least for now, say analysts, who estimate that the debt-to-gross domestic product ratio (GDP) will rise to 112.3% this year, essentially with the depreciation of the national currency, the metical. The debt-to-GDP ratio is expected to drop to 99.7% in 2022.

Source: Lusa via Club of Mozambique

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