Mozambique’s gross domestic product (GDP) growth rate slowed in 2015 as the economy adjusted to lower world commodity prices and decreased inflows of Foreign Direct Investments (FDI). Real GDP growth is expected to continue decelerating through 2016 and into 2017 at 6%, driven by falling exports revenues, rising import costs and reduced FDI. Weak external demand conditions and low commodity prices are anticipated to continue over 2016-2017, and then recover gradually by mid-2017 in line with world forecasts.
Inflation accelerated in the second half of 2015, as rising food costs and the depreciation of the metical drove an increase in consumer prices. The deterioration of the external accounts caused the metical to depreciate in 2015, exacerbating inflationary pressures. The consumer price index (CPI) inflation rate reached 11.1% in December 2015, up from 1.1% a year earlier. This coincided with almost a 70% depreciation of the metical against the US dollar and a roughly 40% depreciation against the South African rand. Over the longer term the continued depreciation of the real exchange rate could help stimulate nontraditional exports given adequate investment in complementary infrastructure.
The government adjusted its fiscal stance in 2015 and adopted tighter monetary policies from October through December of 2015. The fiscal adjustment has focused on cuts to public investment financing through the budget, in contrast to previous years where allocations to public investment substantially increased. Current expenditures increased by 11% between January and September 2015, year-on-year, while capital expenditures shrank by nearly 40%. In terms of monetary policy, the central bank has increased the rates of compulsory reserves and interbank rates.
The 1992 peace agreement marked the transition from civil war to peace, culminating in the country’s first democratic elections of 1994 and the emergence of the Front for the Liberation of Mozambique (Frelimo) as the dominant political force in the country, a fact that still holds true today.
In January of 2015 after the 5th peaceful election process, Mozambique’s fourth president came into office: Mr Filipe Nyusi; the winning ruling party Frelimo candidate of October 2014 general elections. His party also secured a strong majority in the parliament, with 144 seats out of 250 in total, though in sharp decline compared to the previous election in 2009 when it garnered 75% of the vote. Renamo, the former rebel-group-turned-opposition party, more than doubled its seats in the national parliament. However, it has disputed the results as fraudulent and has proposed a further decentralization of the current political system. Recent events point to a deteriorating peace in Mozambique with Renamo waging a low level insurgence as means to put pressure on the government to concede on some of its demands, chiefly the possibility to name provincial governors in six Northern provinces where it claims to have won the elections.
Mozambique’s rapid economic expansion over the past decades has had only a moderate impact on poverty reduction, and the geographical distribution of poverty remains largely unchanged. Mozambique also needs to improve its social indicators. The country ranked 178th out of 187 countries in the most recent Human Development Index (HDI). The adult literacy rate is 56%, and average life expectancy at birth is just 50.3 years. Mozambique faces other challenges such as increasing malnutrition, and stunting. Malaria remains the most common cause of death, responsible for 35% of child mortality and 29% for the general population. HIV prevalence among adults shows a downward trend, stabilizing at a relatively high rate of 11.5%.
The social progress index for access to improved sources of water and sanitation ranks Mozambique 128th and 119th, respectively, out of 135 countries. Indeed, Mozambique has one of the lowest levels of water consumption in the world. As a response to such challenges, the Mozambican authorities have considered the social sectors as top priorities and funding has been increasing for those sectors in general.
Last Updated: Apr 07, 2016