Mozambique to grow 5.3% this year and 6.5% in 2023 on gas

“We anticipate that Mozambique’s real GDP will accelerate from an estimated 2.2% in 2021 to 5.3% in 2022, mainly driven by investments in physical assets, with the gas sector emerging as the main driver of investment flows in the country,” reads the latest analysis of the Mozambican economy.

In the report, sent to investors by the consultancy owned by the same owners of the Fitch Ratings agency and to which Lusa had access, analysts point out that “despite private consumption slowing this year due to the rise in inflation, which erodes the purchasing power of consumers, the restrictions under the covid-19 pandemic continue to ease, and this will increase consumption.”

For 2023, GDP growth is expected to accelerate to 6.5%, “on the back of increases in liquefied natural gas production and exports,” Fitch Solutions adds.

Looking at public finances, this consultancy forecasts that the current account deficit will improve from 21.8% of GDP in 2021 to 16.2% this year, the lowest in twelve years.

“We anticipate that growth in goods exports will outpace growth in goods imports, driving this remarkable improvement in the deficit,” they explain, pointing to coal, aluminum, and gas as the main raw materials to be exported.

In monetary policy, the Bank of Mozambique is expected to raise its key interest rate again by 50 basis points (0.5 percentage points) to 15.75% by the end of the year.

“Inflation pressures will lead Mozambican policymakers to raise the interest rate, with strengthening economic growth allowing the central bank to maintain its interest rate at 15.75% in 2023 as inflation slows and robust economic growth is maintained,” they argue.

On the violence in the north of the country and the impact on natural gas exports, Fitch Solutions estimates that exports will grow 238.5%, or more than triple the current rate, mainly due to Eni’s increased production at the project off the coast of Mozambique.

“ExxonMobil is likely to reach a Final Investment Decision in 2023, and TotalEnergies is likely to resume the LNG project in 2023, which increases asset investments overall, which are expected to rise 7% and contribute 3.4 percentage points to economic growth,” the analysts say.

The main risk of these forecasts, they admit, is “the continuous insurgent attacks in Cabo Delgado province,” whose current or future actions “may delay the development of the natural gas sector, potentially even encouraging other companies to suspend or cancel operations in the country.

“In addition to further delaying the resumption of TotalEnergies’ work and freezing the decision of other firms considering investing in the country, such as ExxonMobil,” they conclude.

With information from Agência Lusa