In an interview with Profile, Egas Daniel, a Mozambican economist, was asked to analyze the performance of the national economy in 2023 and the outlook for 2024.
The analysis points to several positive developments and it is expected that the country will continue to perform well with the average annual economic growth rate projected at around 5.5% according to the CFMP 2024-2026.
How do you assess the country’s inflation trajectory throughout 2023 and what are your prospects for 2024? What could possibly affect prices and, amid this scenario, what will the interest rate look like?
Inflation in Mozambique for the year 2023 performed well, as it showed a downward trend, dropping from the two digits of the previous year (above 10%) to one digit, up to 4.33% in November 2023. For the year 2024, the price situation will remain stable, with inflation expected to reach 7%, remaining in the single digits.
Prices could spiral out of control if the war in the Middle East escalates and causes a crisis in the region that leads to difficulties in exporting oil, which could lead to a rise in the price of barrel crude and precipitate imported inflation for countries like Mozambique
Therefore, looking at the favorable performance of macroeconomic indicators until the end of 2023, there is room for the Bank of Mozambique to reduce interest rates, creating greater momentum for investment, employment and economic growth.
In your opinion, what has been aggravating the country’s unemployment rate recently? Is it possible to say that unemployment could continue on this downward trend next year? Or could there be obstacles in the way?
Unemployment in Mozambique has been rising in recent years, probably due to the fact that economic growth has not kept pace with population growth since 2014, i.e. the inability of the economy to absorb the 500,000 or so young people entering the job market.
Secondly, the nature of economic growth in Mozambique is not inclusive enough to allow for such absorption of labor. Recent economic dynamics have been concentrated in the extractive sector of a specialized, concentrated nature, with weak links to other sectors, which makes such growth only quantitative and incapable of promoting an increase in income and quality of life for the bulk of the Mozambican population.
Finally, the state has been unable to create and influence such a more inclusive and job-creating economic dynamic due to crises that limit this capacity. Since 2014, the country’s development program has been plagued by “unforeseen” events such as hidden debts, floods, droughts, cyclones, terrorism, pandemics, wars in Russia-Ukraine and the Middle East, etc., which challenges any effort to promote inclusive economic growth.
Investments: What should investors look out for this year?
Private investments are made on the basis of entrepreneurs’ expectations of profitability. Then the state can create incentives (special zones, temporary and rational exemptions, regulatory and procedural facilitation – less bureaucracy) for strategic areas such as agriculture, agro-processing or agribusiness and manufacturing, whose potential for generating employment and income is greater. As for public investment, it should continue to prioritize social sectors (education and health) with a long-term impact, as well as investments in infrastructure (especially transport), which will create greater dynamics and make private investment viable in the medium term, which could result in greater growth and employment for the country.
What is your analysis of the national private sector’s participation in the extractive industry? What about the sector’s contribution to the Gross Domestic Product (GDP)?
Participation is still low, not just because of the absence of the law, but because of the business environment which is hostile to the emergence of a vibrant national private sector capable of taking advantage of the opportunities offered by the extractive industry. This is why, although the extractive sector’s contribution to economic growth has been above 30% for the last 3 years, this does not translate into practical terms for the income of nationals, which has a limited impact on Mozambicans.
What are the main prospects for the economic scenario in 2024?
For 2024, the economy is expected to continue to perform well, with the average annual economic growth rate projected at around 5.5% according to the CFMP 2024 2026. This growth will be sustained not only by the natural gas sector, but also by the maturing effect of the Package of Measures for Economic Acceleration (PAE), which could play an important role in boosting economic activity, as well as the contribution of the agriculture, trade, construction and transport and communications sectors.In general, as 2020 saw the economy fall (-1.25%), 2021 the end of the fall (2.2%), 2022 the start of the recovery (4.1%), 2023 the recovery itself (7% forecast), 2024 will be the year for consolidating growth (5.5% forecast).The nature of this growth still needs to be improved if it is to be inclusive, sustainable and possibly lead to better living conditions for Mozambicans.
