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UN: Large Extractive Projects Are Driving Mozambique’s Growth

UN: Large Extractive Projects Are Driving Mozambique’s Growth

The economist who follows Mozambique’s economy at the United Nations told Lusa on Sunday, January 21, that the restart of major natural gas extraction projects in the north of the country is the main driver of growth.

“Our estimate of the economy’s growth is relatively positive, there was a risk of political instability, but it has been mostly contained, and recently some of the large projects in the extractive industry have restarted,” said Katarzyna Rokosz, predicting growth of 5.2 per cent this year and 6.8 per cent in 2025.

In an interview with Lusa following the release of the United Nations Department of Economic and Social Affairs (UNDESA) report on the world economy, the analyst stressed that political stability is fundamental to guaranteeing investor confidence in the bet made on this southern African Lusophone country.

“We monitor the general situation regarding political affairs, because this is an essential condition for projects to materialise and for positive prospects to materialise,” Rokosz said of Mozambique, which is holding presidential and legislative elections this year, following last year’s regional elections.

UNDESA predicts “modest economic growth” of 3.5 per cent for Africa this year, in a context of global economic slowdown and worsening public debt.

“Economic growth in Africa is expected to remain modest, held back by the global economic slowdown, tightening monetary policy and fiscal conditions, and a worsening debt sustainability situation,” reads the World Economic Situation and Prospects (WESP) report.

Last year, growth on the African continent was 3.3 per cent, with many economies facing increases in inflation, mainly due to rising fuel and food prices, and many also experiencing currency devaluations due to reduced exports and a limited injection of foreign capital.

“Despite these challenges, the African economy is expected to grow by 4.2 per cent in 2025,” says UNDESA in the report, which points to the increase in public debt in relation to Gross Domestic Product (GDP) growth and “exorbitant debt costs” as a “significant obstacle to growth prospects”.

The latest estimates suggest that 18 African countries will have a debt-to-GDP ratio of over 70 per cent by 2023, with many of them in a situation of over-indebtedness, which makes access to and the cost of external finance more expensive and makes financing development “a daunting challenge”, since the cost for African countries to access international markets is up to four times higher than the cost for developed countries.

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The document also notes that poor trade performance, the impacts of climate change and geopolitical instability also cast a shadow over prospects on the continent, which has a climate finance deficit of around 120 billion dollars (110 billion euros) a year, receiving only 2 per cent of the world’s funding flow for green energy projects.

Globally, UNDESA predicts that world economic growth will slow from an estimated 2.7 per cent in 2023 to 2.4 per cent this year, “tending to fall below the pre-pandemic [covid-19] growth rate of 3 per cent”.

“Last year’s stronger-than-expected GDP growth masked short-term risks and structural vulnerabilities,” reads the report, which assumes a “gloomy economic outlook for the short term”, underpinned by the “persistence of high interest rates, a new escalation of conflicts, slow international trade and an increase in climate disasters”, which pose significant challenges to global growth.

Lusa

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