The Mozambican Economy

Sound Fundamentals, But Politics To Be Monitored

Economic activity remains robust

The Mozambican economy expanded 7.4% YoY during 3Q14, a slight improvement from the 7.3% registered in the previous three months. The key economic growth drivers included the manufacturing industry (14.8% YoY), mining (11.5% YoY) and construction (11.4% YoY). Overall, real GDP improved 7.4% during the first three quarters of 2014 and is therefore keeping the same growth pace as in recent years. Current forecasts from the Central Bank and the IMF suggest that the growth rate for the whole of 2014 will stand at near 7.5%, one of the highest in sub-Saharan Africa.     

Consumer price inflation continues its downward trend

Data from the country's national statistics office (INE) showed that consumer prices rose 0.71% MoM in December 2014 (vs. 0.36% MoM in the previous month). The food & non-alcoholic beverages segment was the one mostly responsible for this increase. Consumer prices were up 1.93% YoY while the 12-month average stood at 2.56% (vs. 3.54% and 4.26%, respectively, in the same period of 2013). Data also showed that inflation in Maputo remained below the national average in 2014.

Domestic receipts (mostly taxes) finance government expenditures

The government recently disclosed its budget execution report for the first three quarters of 2014. Total revenues saw a 31.5% YoY improvement and stood at 75.8% of the government's yearly target. The large majority of receipts came from fiscal revenues, namely income tax (43.2%) and goods & services (40.6%) related taxes. If including capital gains of the companies operating in the oil sector, the contribution from megaprojects would reach 19% of total revenues (vs. 10.6% in 2013). On the other hand, total expenditures (including lending) increased 27.6% YoY, but stood at 59.7% of the yearly target. Overall, the budget deficit (ex-grants) stood at 8.1% of GDP while if including grants it would stand at 4% (annualized figures).

Frelimo wins October general elections

The ruling Frelimo party won the country's general elections, despite the allegations of fraud coming from the opposition parties. The results were approved by the elections committee (CNE) and recently validated by the Constitutional Council. As expected, Mr. Filipe Nyusi was elected president, but with only 57% of the votes (vs. 75% of his predecessor in 2009). The elections also showed increased support for the opposition parties in the national parliament and provincial assemblies. We highlight that there have been protests in some parts of the country, which are not unusual after the release of election results. We believe this should not escalate into violence (as seen in the recent past), but Mozambique is at an important crossroad in the stage of its development due to the tremendous potential offered by its natural resources. As a result, the political and security environment in the country will be something that will surely be carefully regarded (and ensured) by the local authorities.