Thursday, July 18, 2024

Economic Outlook Report – November – 2023: Credit to the economy continues to shrink.

The Economic Situation and Inflation Outlook Report (CEPI), as an additional vehicle for communicating the decisions of the Monetary Policy Committee, discloses the factors and rationale of the measures taken by the body, broadening the public’s understanding of the objectives and conduct of monetary policy.

Taking a brief look at economic activity in the short term, there are prospects for moderate GDP growth, excluding LNG production. In fact, the performance of the primary (agriculture and coal production) and tertiary sectors (transport and communication services, and hotels and restaurants) is expected to continue to sustain GDP growth, in a context in which the performance of the secondary sector will continue to be constrained and the prices of the main export commodities will continue to limit the expansion of economic activity.

The short-term outlook is in line with the evolution of the Industrial Production Index (PMI), which, despite the slowdown, still remains at the reference level of improvement.
Credit to the economy continues to shrink. The dynamics of consumption and private investment, characterized by the annual slowdown in credit to the economy granted by the banking system in September 2023, is essentially explained by the prevalence of restrictive monetary conditions.

As far as domestic public debt is concerned, it continues to rise. The cumulative amount of domestic credit contracted between December 2022 and November 2023 rose by around 59.327 billion meticais, giving a total domestic debt stock of around 334.440 billion meticais. Among the main instruments used to finance the cash deficit are treasury bonds and advances to the Bank of Mozambique.

This scenario is expected to continue, given the limited collection of tax revenue and the low disbursement of external resources. The country’s international reserves remain at satisfactory levels.
The country’s external position, measured by gross international reserves, remains satisfactory, with an accumulated balance of around USD 3.143 billion by November 15, 2023, enough to cover around 4 months of imports of goods and services, excluding major projects.

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