Mozambique’s exports have had a slower growth since the recovery from the shock caused by the COVID-19 pandemic. The country’s total merchandise exports had a slower growth since the recovery to USD 5379.3 million in 2021. Mozambique has a relatively diversified export profile and earnings from aluminium have begun recovering despite being below the medium-term average at USD 942.7 million (approx. 17.5% of total exports) in 2021. Other top exports from Mozambique include coal and metallic ores. These exports contributed USD 1382.4 million (approx. 25.7% of total exports). Mozambique’s export earnings from coal have begun recovering despite being below the medium-term average to USD 929.4 million in 2021; and earnings from metallic ores have continued increasing to USD 453.0 million) in the same period. Mozambique’s trade deficit widened to its historical medium-term average at -USD 4.9 billion in 2021.
Total merchandise export earnings have continued increasing which ameliorated the relieved pressure caused by net FDI inflows (foreign capital being invested domestically). Mozambique’s FDI inflows increased to USD 5.1 billion in 2021. Hence, Mozambique’s FDI stock has been seemingly unaffected by COVID-19 and continued increasing from an annual average of USD 43.3 billion for 2018 to 2020, to USD 50.1 billion in 2021. This bodes well for Mozambique as a country that is aiming to attract more foreign investment to develop and diversify its economy away from the reliance on aluminium and mining exports. However, the current interest by foreign investors has focused on natural gas extraction which both diversifies Mozambican exports but also increases reliance on mining. Therefore, Mozambican authorities need to develop industrial policy and incentives to attract investment in the many economic opportunities in non-traditional sectors.
Remittances receipts have grown consistently over the period. Personal remittances received have been seemingly unaffected by COVID-19 and continued increasing from an annual average of USD 314.8 million for 2018 to 2020, to USD 454.0 million in 2021. Personal remittance payments to foreign nationals have also been seemingly unaffected by COVID-19 and continued increasing from an annual average of USD 207.6 million for 2018 to 2020 to USD 221.1 million in 2021. Mozambique has had net remittance inflows (net remittance receipts from the diaspora) which increased to USD 232.9 million in 2021. This has affected the current account balance and strength of the MZN over the period.
The MZN has continued depreciating only slightly. In nominal terms, the MZN depreciated by an annual average of -0.5% against the USD for 2018 to 2020. The MZN depreciated by -2.9% to an annual average of MZN 65.5 per USD in 2021. Mozambique’s current account deficit narrowed below the historical medium-term average. In 2022, Mozambique’s current account deficit widened beyond the historical medium-term average. In particular, Mozambique has benefited from high global commodity prices which continued appreciating due to lower global supply following the sanctions against Russian after its military exercises in Ukraine. The global price of aluminium increased by 14.5% to USD 2,831 per MT in 2022 (2021: 45.1%; USD 2473 per MT). However, this has been offset by continued imports into the Mozambican natural gas sector and higher fuel and food import prices. This is also reflected in the projections for Lesotho’s current account balance.
In 2023, Mozambique’s current account deficit is projected to narrow despite being wider than the historical medium-term average at -USD 7.8 billion (approx. -39.6% of GDP). In the medium-term from 2024 to 2026, Mozambique’s current account deficit is project to widened in nominal terms, to an annual average of -USD 8.1 billion (approx. -34.5% of GDP). This illustrates a persistent deterioration in the current account balance despite to the current rebound in commodity prices. Nevertheless, commodity prices are expected to remain relatively elevated in 2023. This could change in the medium-term due to the expected easing of geopolitical tensions and the gradual transition away from fossil fuels. Therefore, Mozambican authorities will have to take advantage of the current reprieve and invest in further diversification of the country’s exports away from the continued reliance on aluminium.
The issue of diversifying the Mozambican economy remains an elusive obstacle for the country. Mozambique still has a significant potential to grow its exports from coal and metallic ores. These represent the highest growth potential towards diversifying the Mozambique’s economy and export earnings. Apart from this, Mozambique should also deepen its integration in the SADC region and increase its intra-regional trade. This will provide an opportunity for Mozambique’s exports to compete against goods and services of comparable quality from the SADC region. Moreover, Mozambique can offset the risks with its traditional export markets by increasing its dependence on the SADC region for its exports.