According to projections by First National Bank Mozambique (FNB), and compared to 2023, Mozambique’s economy could see a positive evolution this year. Growth could reach 4.9 per cent, driven largely by the extractive sector. However, uncertainties prevail, above all due to adverse climatic events and the persistent scenario of terrorism in Cabo Delgado. The forecasts were released by the bank on Thursday 11 April in Maputo.
In the context of the FNB Breakfast Economic seminar, an annual event that brings together distinguished Mozambican economists to provide relevant economic information, Samantha Singh, an economist at Rand Merchant Bank (RMB), FirstRand’s corporate and investment banking partner, of which FNB Moçambique is an integral part, was invited to share an overview of supply chain fluctuations.
Overview
The economist said that, ‘from a global perspective, we are seeing moderate economic growth, an increase in geopolitical tensions, changes in inflation dynamics and central bank action. Commodity movements are largely driven by global growth, while conflicts and geopolitical tensions pose risks to commodity prices’. Singh pointed to oil demand as being at an all-time high, while there are also some supply constraints.
Africa’s economy
According to the RMB economist, ‘although growth prospects in Africa are heterogeneous, there are indicators of improvement’, highlighting emerging economies such as Nigeria and Kenya, ‘which have been overcoming significant challenges, particularly in terms of liquidity’.
With regard to the pandemic, Singh recalled: ‘we are facing budgetary imbalances aggravated by rising health spending. Many countries have turned to the IMF for assistance with fiscal adjustment and financial management programmes.’ She also emphasised the impact of elections in more than 40 African countries this year, influencing government policies and dynamics, as well as the definition of public policies.
Mozambique’s economy
The presentation on the national economic outlook was given by Alfredo Mondlane, head of economics and market research at FNB Mozambique, who also reiterated the importance of the upcoming presidential elections, scheduled for 9 October.
Electoral expectations for 2024
According to Mondlane’s analysis, no major changes are expected on the Mozambican political scene. ‘The Frelimo party should maintain its dominant position, a historical pattern,’ he said, based on the competitive balance observed in the most recent municipal elections.
Mozambique’s economic update
‘In 2023, we will see economic growth of around 5 per cent, compared to the previous year’s growth of around 4 per cent. As a result, our growth prospects point to an increase of 4.9 per cent for 2024,’ he said.
The economist expects the economy to accelerate to a growth rate of 5.6 per cent in the medium term. ‘We believe that in the future, the LNG industry, the gas industry and the extractive industry will be at the forefront of economic growth, which will also be supported by service industries, specifically financial services. We also expect the transport and communications industry to support this growth.’
Political and geopolitical challenges and risks
Mondlane pointed to the political and military instability in Cabo Delgado as one of the main challenges, emphasising the geopolitical risks, such as tensions between China and the US and conflicts in the Middle East. ‘These factors could have repercussions on Mozambique’s economy, especially through the channels of inflation and foreign investment,’ he emphasised.
Inflation and monetary policy
‘Inflation, which stood at 4.4 per cent in December, should moderate before March. However, there is a risk of a reacceleration during the year, due to some geopolitical tensions and oil prices,’ said Mondlane. ‘The Bank of Mozambique is implementing cuts in the monetary policy rate, currently at 15.75 per cent, to contain inflation and stimulate economic growth,’ he added.
Market overview and future prospects
In conclusion, Alfredo Mondlane referred to the financial market, anticipating a ‘possible contraction of liquidity due to tighter monetary policies’, and emphasised the importance of the government’s fiscal discipline for sustainable debt management, recalling the strengthening of national reserves as a preventative measure for future government needs.
