The Mozambican Economy - Challenging Times Ahead

Growth forecast of 2.2% this year

The Mozambican government’s real GDP growth projection of 2.2% for this year may prove to be somewhat optimistic considering the uncertainties surrounding the impact that Covid-19 could ultimately have on the local economy. Indeed, the world economy is already facing a sharp recession in 2020 and, although Mozambique performed relatively well in the last global crisis about a decade ago (growing at 6-7% annually during the period), this time it could be different. The country’s main trading partners (South Africa, India, China and the Euro area) are all being severely affected by the pandemic while the prices of its main exports (from the mining sector) continue to plummet, putting additional pressure on Mozambique’s already fragile external accounts. Moreover, the announcement by US oil major ExxonMobil that it was postponing (without deadline) the final investment decision on its LNG project in the Rovuma Basin due to the latest crash in energy prices is likely to affect economic activity while the escalation of military tensions in the northern and central parts of the country could also limit its economic growth trajectory in 2020.