| Recent macroeconomic and financial developments |
| Real GDP grew by an estimated 5.0% in 2023, up from 4.2% in 2022, driven mainly by extractive industries as liquefied natural gas processing matured in the Coral South Field. The extractive and service sectors were the main drivers of growth on the supply side, while private consumption drove growth on the demand side. Tight monetary policy and lower local food and transport prices reduced inflation from 10.3% in 2022 to an estimated 7.1% in 2023. |
| The fiscal deficit improved from 5.1% of GDP in 2022 to about 2.8% in 2023, reflecting cuts in public spending and higher domestic revenue collection as the economy gradually recovered. Mozambique is in debt distress, but its debt is assessed as sustainable on a forward-looking basis. The current account deficit has improved from 34.2% of GDP in 2022 to an estimated 11.1% in 2023 led by increased exports and declining imports. Foreign direct investment and external borrowings were the main sources of financing for the current account deficit. International reserves dropped from 3.1 months of import cover in 2022 to 2.2 months in 2023 due to currency depreciation. Asset quality remains low, with nonperforming loans at 9.1% of gross loans in September 2023 and 9.3% in September 2022, driven by high lending rates. |
| Poverty remains high at an estimated 74.5% in 2023, with about 24 million people living in poverty. The employment rate fell from 75.6% in 2019 to 73.6% in 2020 as recent growth has not been inclusive. |
| Outlook and risks |
| Real GDP is projected to grow by an average of 5.2% between 2024 and 2025, driven by the extractives sector, particularly gas production. Growth will be supported by extractives and agriculture on the supply side and by private consumption and foreign direct investments on the demand side. Key headwinds arise from climate change, a slowdown in reform implementation with the upcoming general election in October 2024 and continuing global supply chain disruptions due to Russia’s invasion of Ukraine. The fiscal deficit is projected to widen to 3.4% of GDP in 2024 before narrowing to 1.3% in 2025 as fiscal consolidation and improved revenue collection take hold. Inflation should fall to an average of 4.8% between 2024 and 2025, in response to prudent monetary policy. The current account deficit is projected to increase to 38.1% of GDP in 2024 and 43.0% in 2025 as imports rise. |
| Reform of the global financial architecture |
| Mozambique’s economic structure is determined largely by the extractives sector, with its large gas reserves of 180 million cubic feet, the third largest in Africa. There has been only limited structural transformation of the economy, with a slight shift from agriculture to services. In 2001, the services sector was the main contributor to GDP growth, accounting for 50%, followed by agriculture at 32.2%, industry (including extractives) at 18%, and manufacturing at 12.2%. Two decades later, economic activity continues to be driven by the services sector, which accounted for 51.7% of GDP in 2021, while agriculture’s share had fallen to 28%. Mozambique’s structural transformation is hampered by skills shortages and a high illiteracy rate among 15- to 34-year-olds (31.4%), skills mismatches, lack of infrastructure, high public debt, and a low level of industrialization. |
| Financing structural transformation in Mozambique requires multiple measures over different timeframes. In the short term, the government needs to strengthen debt management capacity, fiscal discipline, and financial sector regulation. In the medium term, the government needs to fast-track debt restructuring under the G20 Common Framework, and multilateral development banks need to deploy risk mitigation instruments to attract private investors and provide technical assistance to mobilize climate financing. In the long term, international private-sector support is needed for identifying and mitigating key investment risks. |
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Republic of Mozambique |
