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GDP Growth and Public Finance in Mozambique: FY2019/20

GDP Growth and Public Finance in Mozambique: FY2019/20

GDP Growth and Public Finance in Mozambique: FY2019/20
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  • Last Updated Nov 4, 2019

GDP Growth and Public Finance in Mozambique: FY2019/20

Mozambique’s economy has been on a downward spiral due to slow improvements in coal and aluminium prices and reduced mining production. The Mozambican economy and mining sector were severely affected by fluctuations in world commodity prices towards the end of 2014. Because coal (approx. USD 1.7 billion) and aluminium (approx. USD 1.2 billion) exports constituted 56.8% of total exports in 2018, the Mozambican economy is susceptible to external shocks caused by the commodity price fluctuations. The price of coal declined by an annual average of –7.1% from USD 75.7 per MT in 2014 to USD 70.1 per MT in 2016. The price of aluminium also declined by an annual average of –4.5% from USD 1867.4 per MT in 2014 to its lowest at USD 1604.2 per MT in 2016. As a result, export earnings declined and the Mozambican Metical (MZN) depreciated by an annual average of –21.0% from MZN 31.5 per USD in 2014 to MZN 63.1 per USD in 2016. Due to the MZN depreciation, pass through inflation resulted in Mozambican consumer price inflation to rise to its peak of 19.9% in 2016 which far exceeds the Bank of Mozambique’s policy target band of 5.0% to 6.0% inflation. Nevertheless, coal prices recovered in 2016 and aluminium prices started recovering 2017 but this has not been sufficient to enable a recovery in real gross domestic product (GDP) growth. GDP is expected to continue declining from an average of 3.6% from 2016 to 2018, to a projected 1.8% in 2019 (2015: 6.3%).

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