The Ministry of Economy and Finance (MEF) foresees the worsening of the average exchange rate for the year 2021. In the Fiscal Risks Report 2022, published at the end of last August, MEF reveals that the Metical depreciated in 2020, reaching an average of 66.6 MT/USD, against an initial forecast of 60.0 MT/USD.
“For 2021, the projections changed with the impact of Covid-19, expecting pressure on the foreign exchange market, which could raise the exchange rate to 68.0 MT/USD,” the document reads.
However, compared to the initial forecast (contained in the 2021 State Budget), the MEF report shows that there has been a negative variation of the worsening exchange rate. Initially, the MEF forecast that the average annual exchange rate would reach 69.0 MT/USD.
Fitch Solutions, an international financial rating institution, also revised downwards its forecast for the devaluation of the Metical against the Dollar in 2021. Initially the forecast for the end of the year was 74 Meticais per dollar, but in August the institution reduced it to 71 Meticais per dollar, due to an improvement in the prices of coal and aluminium, two of the country’s main export products.
In terms of prices, the MEF forecasts for 2021 a certain stability in the level of inflation, at 5.0%, which is equivalent to a reduction of 0.5 p.p. from last year. The source points to a probability of materialisation of the deceleration risk, of the reduction of the general price level, of 42.9%.
