The Government announced that Mozambique’s Gross Domestic Product (GDP) fell 10.14% short of its potential in 2024 due to the post-election crisis and the impact of cyclones, admitting that in the current year the economy will operate only 2.7% below potential.
“This fact shows that the economy is operating significantly below its productive capacity, a phenomenon mainly attributed to the post-election crisis and the impact of Cyclone Chido, recorded in 2024,” the Executive explained through the Medium-Term Fiscal Scenario (MTFS) 2025–28 document, adopted on 24 June by the Council of Ministers.
The report states that “although the economy may record a recovery in real growth in 2025, the GDP gap is still expected to remain in negative territory until next year, that is, below its productive capacity, due to the persistence of certain cumulative effects resulting from the successive shocks recently observed.”
In the document, cited by Lusa, it is also warned that “certain exogenous fiscal risks may exert adverse pressure on the current 2026–28 macro-fiscal framework, particularly potential natural disasters, security threats in the country’s northern region, and the persistence of post-election demonstrations.”
“With regard to natural disasters, Mozambique’s geographical location makes the country particularly vulnerable to the cyclical occurrence of extreme weather events, which generate adverse impacts both on the population and on less resilient infrastructure, thereby undermining socio-economic and fiscal stability,” it adds. According to the Government, the latest forecasts indicate the persistence of the neutral phase of the El Niño phenomenon until the start of the next rainy season, which begins in October, from which point “there will be signs of a possible transition to typical La Niña conditions, which tend to favor increased rainfall in the central and southern regions of the country.”
In June, the Minister of Finance, Carla Louveira, stated that “in recent years,” the country’s macroeconomic management has faced “challenges stemming from external and internal shocks that deeply affect” the economy, such as terrorism in Cabo Delgado, extreme weather events, and “violent demonstrations” following the general elections of 9 October 2024.
At the time, the minister explained that the demonstrations caused “the destruction of public and private infrastructure, which led to an economic slowdown of 3.6 percentage points, resulting in growth of 1.9% compared to the 5.5% projected in that year’s PESOE (Economic and Social Plan and State Budget).”
“This situation persisted into the first quarter of 2025, with GDP recording a negative variation of 3.9% compared to the same period in 2024, influenced by negative variations in the secondary sector of 16.2%, followed by the tertiary sector with a negative variation of 8%,” she added.
“This demonstrates that the context remains challenging, and it was in this context that the Assembly of the Republic approved the PESOE for 2025, which sets fiscal consolidation as the primary goal to balance the State’s accounts. To this end, measures were approved to increase efficiency in revenue collection and stabilize the level of public debt related to the wage bill, in order to reduce the primary deficit and create room for productive investment,” the minister further stressed.
What is the output gap?
The output gap is the difference between a country’s current Gross Domestic Product (GDP) and its potential GDP, which can be positive or negative, and measures the cyclical fluctuations of a given economy.
Source: Diário Económico
