The private sector began the year with signs of a slight recovery, despite remaining in negative territory. Standard Bank Mozambique’s Purchasing Managers’ Index (PMI) rose to 47.5 points in January, after registering 46.4 in December, indicating a less severe contraction in business activity in the country.
According to the PMI report, published by Standard Bank and S&P Global, companies continue to face difficulties, but the pace of deterioration in economic conditions has slowed. Production and new orders fell for the third month running, although less sharply than in December.
‘The Standard Bank Mozambique PMI rose from 46.4 in December to 47.5 in January. There were consecutive monthly contractions in production, new orders and supplier delivery times. However, some recovery was felt in employment and inventories,’ explained Fáusio Mussá, chief economist at Standard Bank Mozambique.
One of the highlights of the report was the increase in employment and purchases of means of production. After two months of staff cuts, companies started hiring again, a sign of greater confidence in the recovery of economic activity. Similarly, businesses increased their purchases of raw materials and inputs for the first time in three months.
The document also points to an easing in production costs, with product prices falling again, reflecting weak domestic demand and an easing of tensions in the markets. The cost of wages also fell slightly, impacting business budgets.
“The Standard Bank Mozambique PMI rose from 46.4 in December to 47.5 in January. There were consecutive monthly contractions in production, new orders and supplier delivery times. However, some recovery was felt in employment and inventories”
Since October, Mozambique has been facing a period of social instability, triggered by post-election protests challenging the results of the presidential elections held on the 9th of that month. Demonstrations and stoppages have directly affected the private sector, reducing commercial activity and consumption.
In January, however, companies reported a slight increase in their client portfolio, suggesting that the impact of the demonstrations on the business environment may be diminishing. Even so, the PMI index is still below the 50-point level, which means that business sentiment remains negative.
Despite the tentative recovery, economists warn that the Mozambican economy still faces significant challenges. The country’s Gross Domestic Product (GDP) is projected to grow by just 2.5 per cent in 2024, a slowdown from the 5.4 per cent recorded in 2023. For 2025, a gradual recovery is expected, with estimated growth of 3 per cent.
‘The political and social environment remained tense, but there are signs that economic activity may gain momentum over the course of the year. We expect an improvement in the private sector in subsequent quarters as business confidence strengthens,’ emphasised the Standard Bank report.
Although a full recovery still seems a long way off, the slight improvement in the PMI index suggests that the private sector may be finding a point of stabilisation after months of difficulties. The behaviour of the market over the next few months will be crucial in determining whether the economy manages to reverse the contractionary path and resume sustained growth.
Text: Felisberto Ruco
