The global economic outlook for 2024 and 2025 continues to indicate the maintenance of economic growth at 2023 levels and a trend toward slowing inflation. However, global risks and uncertainties remain high, particularly those associated with conflicts in the Middle East and Russia/Ukraine, the stance of the new U.S. administration, and climate shocks.
Economic Activity and Inflation
According to the Economic Outlook and Inflation Perspectives report, in the third quarter of 2024, advanced, emerging, and developing economies continued to grow, albeit at a slower pace. In the United States, annual GDP growth stood at 2.7%, driven by an increase in household consumption.
Meanwhile, the Eurozone economy grew by 0.9%, reflecting an increase in public spending and household consumption. Among emerging and developing markets, China’s economy stood out with a growth rate of 4.6%, mainly fueled by increased fiscal stimulus, which contributed to the expansion of industrial production and retail sales.
For 2025, projections indicate that global economic growth will remain at 2023 levels, according to the October 2024 edition of the World Economic Outlook. The 2024 outlook forecasts global growth of 3.2%, primarily driven by the recovery of economic activity in Germany and the United Kingdom.
Export Volume
According to the August 2024 Statistical Bulletin of the Bank of Mozambique, Mozambican exports increased by 12% that month, totaling 31.8 billion meticais (approximately USD 500 million). This growth contributed to a slight reduction in the country’s balance of payments deficit, amid a moderate economic recovery.
By the first quarter of 2024, Mozambique’s exports had reached USD 1.764 billion (EUR 1.615 billion), representing an increase of USD 53 million (EUR 48.5 million) compared to the same period in 2023. India was the leading destination for Mozambican exports, purchasing goods worth USD 331 million (EUR 303 million), accounting for 18.8% of total exports.
The main products exported to India included natural gas, mineral coal, dried legumes, and cashew nuts. South Africa was the second-largest importer of Mozambican products, accounting for 16.9% of exports, valued at USD 298.5 million (EUR 273.2 million).
Exports to South Africa included electricity, natural gas, coal, and bananas. South Korea ranked third, accounting for 11.4% of total exports, valued at USD 202 million (EUR 185 million), reflecting an increase of more than 100% compared to the same period in 2023, primarily due to exports of coal and natural gas. These data highlight a positive trend in Mozambican exports in early 2024, particularly with increased sales of natural resources to Asian and regional markets.
PMI Index Performance
The Purchasing Managers’ Index (PMI), an indicator reflecting the operating conditions of private sector companies, remained in positive territory for the sixth consecutive month through October 2024. In September, the PMI stood at 50.3 points, slightly below the 50.9 recorded in August, indicating a slower expansion of the private sector economy. In October, the index saw a slight decline to 50.2 points, signaling modest improvement in business conditions, the weakest in the last six months.
This growth was supported by a moderate increase in new order volumes, driven by the introduction of new services, capacity expansion, and customer acquisition. However, there was a slowdown in business activity growth, reflected in lower job creation and a slight reduction in the acquisition of production inputs.
Interest Rate Reduction
The Monetary Policy Committee (CPMO) of the Bank of Mozambique decided to reduce the monetary policy interest rate (MIMO rate) from 12.75% to 12.25%. This decision is based on the continued outlook of single-digit inflation in the medium term, despite increased risks and uncertainties in projections, particularly those related to post-election tensions, fiscal risks, and climate shocks.
Additionally, the CPMO decided to reduce the Required Reserve ratios for liabilities in domestic currency from 39.0% to 29.0% and in foreign currency from 39.0% to 29.5%, aiming to inject more liquidity into the economy to support the restoration of productive capacity and the supply of goods and services. However, pressure on domestic public debt has intensified.
Excluding loan and lease contracts and overdue liabilities, domestic public debt stands at 435.6 billion meticais, representing an increase of 20.1 billion compared to December 2024. International reserves remain at comfortable levels, with gross reserves sufficient to cover approximately five months of imports of goods and services, excluding major projects.
Impact of Interest Rate and Reserve Requirement Reduction on the Business Sector
(i) Reduction in Credit Costs
The reduction in the MIMO rate suggests a downward trend in credit costs, making financing more accessible for businesses. This will facilitate investments in expansion, raw material acquisition, and working capital, helping businesses grow and become more competitive. However, the effectiveness of this measure depends on how commercial banks pass on the reduction to customers.
(ii) Increased Liquidity in the Financial System
The decrease in Required Reserves for deposits in domestic and foreign currency aims to inject liquidity into the financial system, allowing banks to have more capital available for lending. For businesses, this could mean greater ease in accessing financing, particularly in a scenario where many still face post-election and climate-related challenges.
(iii) Fiscal Risk and Macroeconomic Uncertainties
Despite monetary easing, the increase in domestic public debt (435.6 billion meticais, +20.1 billion compared to December 2024) and post-election tensions could generate uncertainties. High fiscal risk may push the government to seek additional domestic financing, competing with the private sector for available credit.
(iv) Exchange Rate Stability and Imports
International reserves, sufficient to cover approximately five months of imports, remain at comfortable levels. This suggests a relatively stable environment for businesses dependent on imports, minimizing the risk of significant exchange rate fluctuations in the short term.
Persistent Challenges
Overall, while Mozambique has made some progress in improving the business environment over the last 60 days, significant economic challenges persist, requiring ongoing attention to ensure sustainable economic growth.
- Increase in Domestic Public Debt
Between December 2023 and November 2024, the stock of domestic public debt, excluding loan and lease contracts and overdue liabilities, increased by approximately 95.726 billion meticais, reaching 408.067 billion by the end of November. - Delays in Rovuma Basin LNG Projects
Recurring delays in liquefied natural gas (LNG) projects suggest that foreign direct investment will likely remain low, limiting support for foreign exchange supply and the state budget, as well as leading to slower GDP growth.
