Standard Bank’s economic research department yesterday downgraded its estimate for growth in Mozambique’s economy, now forecasting a 1.6% expansion in gross domestic product (GDP) this year.
“Mozambique started the year in a troubled way, leading to a downward revision of our growth forecast made in January, to take into account the negative impact of the increase in the reference interest rate from 10.25% to 13.25%,” reads a note sent to Lusa by Standard Bank’s chief economist in Maputo.
“Our baseline scenario is now of a 1.6% GDP growth for this year, which represents a decrease of 0.2 percentage points compared to the scenario forecast in January,” writes Fáusio Mussá in the note sent to Lusa.
The increase in the central interest rate will cause the real rate to rise from 15.5 percent to 18.5 percent, with the central bank of Mozambique trying to strengthen the effectiveness of its monetary policy, and may set an inflation target, “which would require regulatory changes and political debate,” he adds.
“The central bank’s monetary policy vision is sufficient to discourage imports while sending a signal to the government to contain public spending, which, combined with increased flexibility in managing foreign currency reserves, should improve liquidity in terms of foreign exchange liquidity in the market and ultimately stabilize the metical,” the economist points out.
The reserves at the beginning of February were at 4.1 billion dollars, representing six months of import coverage, excluding the large projects in the area of natural gas, which allows for an improvement in the value of the metical against the dollar at the end of the year, whose revision points to a value of 72.4 against the 80.3 forecast in January.
On macroeconomic forecasts for this year, the team of economists from Standard Bank in Mozambique, led by Fáusio Mussa, also warns that among the main threats are “climate change, a further deterioration in security conditions in the northern province of Cabo Delgado and the consequent increase in humanitarian needs, an increase in restrictions resulting from covid-10 and delays in investments in natural gas, which may increase the budget deficit, depreciate the metical, increase inflation and slow growth.
In the opposite direction, a decrease in covid-19 infections, a faster resumption of work at the natural gas yard on the Total-led project and an announcement of advances in Area 1, led by Eni, may improve forecasts for this year.
