Mozambique borders Tanzania, Malawi, Zambia, Zimbabwe, South Africa, and Eswatini. Its long Indian Ocean coastline of 2,500 kilometers faces east to Madagascar.
About two-thirds of its estimated 31 million people live and work in rural areas. The country is endowed with ample arable land, water, energy, as well as mineral resources and newly discovered natural gas offshore; three, deep seaports; and a relatively large potential pool of labor. It is also strategically located; four of the six countries it borders are landlocked, and hence dependent on Mozambique as a conduit to global markets. Mozambique’s strong ties to the region’s economic engine, South Africa, underscore the importance of its economic, political, and social development to the stability and growth of Southern Africa as a whole.
Political Context
The Front for the Liberation of Mozambique (Frelimo) and the Mozambican National Resistance (Renamo) remain the country’s main political forces, followed by the Mozambique Democratic Movement (MDM). Frelimo won the 2019 presidential and legislative elections in a landslide. Frelimo also secured a majority at the provincial level, thus appointing governors in all 10 provinces.
Mozambique is still grappling with a military insurgency in parts of the gas-rich province of Cabo-Delgado. An estimated three million people are projected to face high levels of food insecurity across the country due to the combined effects of the conflict in the North, climate shocks, and COVID-19 mitigation measures, which have restricted economic activity.
Economic Outlook
A modest recovery is underway. Mozambique saw its first economic contraction in almost three decades in 2020, owing to the pandemic that hit the services and extractive sectors hard. The modest growth rebound in 2021 reflects a combined outcome of agricultural growth and relatively strong recovery in services, on the one hand, and weak performance in extractives and manufacturing, on the other. The growth prospects are positive, supported by the gradual global recovery and LNG and agriculture developments. Growth is expected to accelerate in the medium term, averaging 5.5%between 2022 and 2024, mainly reflecting natural gas (LNG) production. Coral-South’s offshore LNG project plans to start production in 2022 and will likely achieve full capacity between 2023 and 2024. However, substantial downside risks remain, including rising international oil and wheat prices owing to the Ukraine conflict, further waves of COVID-19 infections, natural disasters, and a deterioration in the security situation in the North, which may increase public spending pressures, among others..
As the recent Mozambique Country Economic Update (2021) notes, the country needs to press ahead with its structural reform agenda as the pandemic subsides. 1. Policies focusing on supporting economic transformation and job creation, especially for the youth, would be critical. 2. Targeted interventions to support women and 3. alleviate gender inequalities as well as to harness the power of mobile technology would support sustainable and inclusive growth in the medium term.
Development Challenges
The country’s main challenges include maintaining macroeconomic stability considering exposure to commodity price fluctuations and making further efforts to reestablish confidence through improved economic governance and increased transparency. Moreover, structural reforms are needed to support the struggling private sector. That, and diversifying the economy away from its focus on capital-intensive projects and low-productivity subsistence agriculture, while strengthening the key drivers of inclusion, such as improved quality of education and health service delivery, could in turn improve social indicators.
Last Updated: Apr 17, 2022
