Thumbs up for Mozambique’s growth prospects - CNBC Africa

Thumbs up for Mozambique’s growth prospects


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Mozambique sees positive economic growth prospects. PHOTO: Slovenia Times

Large fiscal deficits, low institutional strength, and low income levels have not deterred Mozambique’s promising growth, according to Moody's Investors Service in the annual Mozambique Credit Analysis published recently.

According to Moody’s, Mozambique (B1 stable) has seen an average real growth rate of 7.4 per cent in the past decade which is expected to continue due to the commercialisation of the country's large coal reserves.

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“We also expect that IMF support will continue, focusing on strengthening institutional capacity and maintaining macroeconomic stability, as well as supporting the country's favourable growth prospects," said Lucie Villa, a Moody's analyst.

Consistent growth in income and consumption in the region can be attributed to the mobilisation of natural resources. Moody's projects that the country will reach a 7.25 per cent growth in 2014 and a 8.2 per cent growth in 2015.

“The development of the coal industry in the coming years, and natural gas in the longer-term, will likely drive Mozambique's exports. The country's natural resource endowments are substantial, amounting to 25 billion tonnes of coal in the Tete Province and 100 to 200 trillion cubic feet in offshore gas in the Romuva Bassin, respectively,” reported Moody’s.  

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The country’s public finances may be at risk due to its infrastructure network upgrades. Despite international donor support fiscal deficits are high. There is uncertainty of when natural resource production will translate into increased government revenue as well as the level of return.

“More positively, Mozambique's three-year policy support instrument (PSI) from the IMF, which was signed in June 2013, continues to provide the country with fiscal, monetary, legislative, and administrative advice and support,” said Moody’s.

Mozambique’s positive rating is also reinforced by the country's relative political stability following a peace agreement between the Mozambique Liberation Front and the Mozambican National Resistance.

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“However, Mozambique's rating remains constrained by the small size of the country's economy (its nominal GDP was 15 billion dollars in 2013) and the lack of diversification, with the agriculture sector accounting for roughly 30 per cent of GDP and employing nearly 80 per cent of the labour force.”