Financial rating agency Fitch downgraded Mozambique to CCC and worsened its macroeconomic forecasts in the wake of the post-election protests, now predicting economic growth of 3.2 per cent this year.
‘The disruption caused by the protests greatly affected economic activity in the last quarter of 2024, through the destruction of property, looting, strikes, and disruptions to the supply chain and confidence,’ writes Fitch Ratings.
It also adds that ‘high uncertainty, tighter fiscal policy and a lack of foreign currency liquidity will affect 2025 growth, which is expected to be 3.2 per cent, down from 4 per cent previously forecast’.
In the note accompanying the downgrade of Mozambique’s rating from CCC+ to CCC, the last level before Financial Default, Fitch writes that the protests of recent months, which have left hundreds dead, ‘are also likely to have affected medium-term investment prospects in sectors other than energy’.
The unrest felt across the country in the last quarter of 2024 also caused the budget deficit to rise to 6.5 per cent of GDP last year, and it should improve to 4.4 per cent this year, but even so, Fitch says that ‘dealing with the large civil service wage bill, in a context of social unrest, will be one of the new government’s main challenges’.
With regard to the evolution of the debt to Gross Domestic Product (GDP) ratio, one of the main indicators analysed by investors, Fitch says that the pace of reduction will slow significantly.
‘The higher deficits mean that we now expect debt to GDP to fall much more slowly, from 93.8 per cent of GDP in 2024, which compares with the peer average of 68.2 per cent, to 93.4 per cent at the end of 2026, which compares with the forecast of 89.9 per cent made in August,’ the analysts conclude.
In downgrading Mozambique’s rating to CCC on 7 February, Fitch took all these factors into account, pointing to financial constraints, high risks in servicing domestic debt, a widening budget deficit, high public debt and political and social unrest, as well as a slowdown in economic activity and uncertainty in foreign currency reserves and the resumption of natural gas projects.
Lusa
