Mozambique Economic Update, December 2019 : Mind the Rural Investment Gap
As 2019 drew to a close, a year when Mozambique faced devastation caused by two severe cyclones, the country looks ahead having made significant progress in terms of economic stability, having strengthened its external buffers and having improved i...
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| Format: | Report |
| Language: | English |
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World Bank, Washington, DC
2020
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| Online Access: | http://documents.worldbank.org/curated/en/480651580155354219/Mozambique-Economic-Update-Mind-the-Rural-Investment-Gap http://hdl.handle.net/10986/33280 |
| Summary: | As 2019 drew to a close, a year when
Mozambique faced devastation caused by two severe cyclones,
the country looks ahead having made significant progress in
terms of economic stability, having strengthened its
external buffers and having improved its fiscal position.
The metical has been broadly stable since mid-2017,
contributing to reduced inflationary pressures and providing
room for an appropriately cautious monetary policy easing
cycle. Growing investment flows, mostly linked to the
extractive industries, have bolstered international
reserves. Additional progress has been made in fiscal
management with a notable reduction in the primary deficit
between 2015 and 2018 and significant efforts to protect
priority spending. Plus, with the progress to date in
advancing its LNG interests, there is much to anticipate
from the coming years. So, in this context and as the
government enters a new term, where should the focus of
policy makers be? The challenge remains to be growth. Growth
was set further back in 2019 as Cyclones Idai and Kenneth
and slower coal production affected output and is expected
to fall to around 2.3 percent in 2019, down from 3.3 percent
in 2018. With a population growth rate of 2.8 percent, this
translates into a decline in the standard of living. Poverty
has been further aggravated by the cyclones, which are
likely to have impacted both the urban and rural poor in the
affected areas. Growth is expected to accelerate with
developments in the LNG sector and progress in post-cyclone
reconstruction. But much of this expected growth is
generated from the demand side of the economy, namely
extractives-led investment and growing consumer demand, and
less so from the supply side such as manufacturing, backbone
services or non-extractive export growth. So, having put
muchof the past economic volatility behind, structural
reforms for more sustainable and inclusive growth must
return to the center of the agenda, with the objective of
recovering from the recent cyclones in the short-term and,
in the medium term, of using the LNG opportunity to produce,
export and employ. |
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