The chief economist of Standard Bank – Mozambique, Fáusio Mussá, believes that the Central Bank is prepared for another increase in the policy rate, if inflationary pressures remain in our country.
It should be noted that the Bank of Mozambique (BM) increased its policy rate by 300 basis points in January, reaching the current level of 13.25%. The central bank’s decision took into account the materialization of various risks to macroeconomic stability, from security challenges, to the increase in Covid-19 infections, and eventually balance of payments and fiscal pressures, all of which have the potential to actually increase inflation.
Commenting on the results of Standard Bank’s latest survey, called the Purchasing Managers’ IndexTM (PMI), Fáusio Mussá recalled that according to the latest publication of the National Institute of Statistics, year-on-year inflation rose to 4.1% y/y in January, up from 3.5% in December.
Food prices rose by 9.1% y/y, after 8.0% the previous month, and is the main reason for the increase in inflation, as it accounts for 33% of the consumer price index basket.
“The storms and heavy rains that have occurred in certain regions of the country since the beginning of the year could negatively affect food production and, by this means, will generate additional pressure on inflation,” he said.
The source added that “our growth scenario analysis published in February suggests end-of-year inflation could range from the highest value of 9.9% year-on-year in the upward case, through 8.9% in the base case, to the lowest value of 6.5% for the same period in the downward case.”
“GDP growth for 2021 ranges from the lowest value of 0.5% for the same period in the least favorable scenario, to 1.6% in the base case and 2% in the most favorable scenario. Even considering that the increase in monetary policy rates support the current trend of the appreciation of the Metical, and may help contain imported inflation, a negative impact is expected on the growth of the economy,” he said.
For Fáusio Mussá, the second season of the agricultural campaign may support growth, although it is extremely difficult to see growth rates in agriculture, which in real terms, are greater than 3% compared to the same period last year.”
