Mocambican economic outlook

7/30/2019 Mocambican economic outlook

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Victor Lled

May 16, 2012

1

The Development Partner Group consists of heads of mission in Mozambique of bilateral donors, the UN, and the international financial institutions.2 This document has not been approved by the IMF Executive Board.


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Outline

Mozambique Recent Economic Developments

Mozambique Economic Outlook

Mozambique : Policy Discussions


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Mozambique Recent Developments Growth

Mozambique

Sub-Saharan

Africa

Frontier

economies 1

0

2

4

6

8

10

12

14

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Real GDP(Percent change from previous year)

Proj.

.1 Frontier economies: Angola, Ghana, Kenya, Mauritius, Mozambique, Senegal, Tanzania, Uganda, Zambia and Zimbabwe.

The global weakness has yet to have a significant impact on Mozambiques economic growth.

Mozambiques growth performance continued to compare favorably with growth rates of its peers.

Growth was broad-based, with agriculture, mining, transportation and communication, and financialsectors outperforming.


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Mozambique Recent Developments External Performance

The external sector performed well with both megaprojects and traditional exports buoyant. Strong private capital inflows especially by megaprojects have helped to maintain the reserve cover.


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Mozambique Recent Developments Inflation

Disinflation in 2011 was impressive with both headline and core inflation coming down from doubledigits to about 2 percent in April 2012 .

Due to favorable developments in international prices, determined monetary tightening , and arestrictive fiscal stance in the first half of the year.


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Mozambique Recent Developments Exchange Rate Strong capital inflows and the monetary tightening have contributed to the appreciation of themetical during 2011.

Our latest exchange rate assessment (June 2011) found the metical was slightly undervalued,though within the margin of equilibrium.

Although the metical has appreciated in real terms in 2011; as of end March 2012 it is still shows adepreciation of 9%, compared to the 2008 peak.

Since February 2012, it has started to depreciate both relative to the key reference currencies andto a weighted average of trading partners currencies in both nominal and real terms.

Real effective

exchange rate

40

60

80

100

120

140

160

Jan-02

Apr-02

Jul-02

Oct-02

Jan-03

Apr-03

Jul-03

Oct-03

Jan-04

Apr-04

Jul-04

Oct-04

Jan-05

Apr-05

Jul-05

Oct-05

Jan-06

Apr-06

Jul-06

Oct-06

Jan-07

Apr-07

Jul-07

Oct-07

Jan-08

Apr-08

Jul-08

Oct-08

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

Jul-10

Oct-10

Jan-11

Apr-11

Jul-11

Oct-11

Jan-12

Apr-12

Nominal effective

exchange rate

Nominal and Real Effective Exchange Rates(Index, Average 2005=100)


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Mozambique Recent Developments External Competitiveness

-Traditional exports have improved in 2011relative to 2010.

- This is particularly interesting given that2010 was a period where exchange rates onnominal and effective terms were relativelydepreciated by historical terms.

-To be sure, small exporters did report to us

during the last mission that the exchange ratewas eroding their profitability.

- However, in recent discussions, private sectorrepresentatives continue to identify the weakbusiness environment, lack of access to finance,and , in the case of agriculture, poor land rightsand unclear contract enforcement as their keybottlenecks.

--All that said, the exchange rate remains animportant factor for external competitiveness.We will continue to monitor exchange ratedevelopments to ensure that it adjust freely toevolving patterns of trade and financial f lowsand closely monitor developments in the realeffective exchange rate with a view to ensuring

external competitiveness and a comfortablelevel of international reserves.


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Global growth prospects are graduallyimproving again. However, the recovery

remains vulnerable and risks are firmlyto the downside.

Downside risks include the two mostimmediate concerns: i) a re-escalation ofthe euro area crisis and (ii) sharplyhigher oil prices.

The worsened global economic outlookfor 2012-13 poses a risk to Mozambiqueseconomic performance but throughlikely different channels than the 2008-09 global crisis:

2008-9: Lower FDI/Export demand, HighCommodity prices

2012-13: Lower aid disbursements and more

limited credit availability

Mozambique Economic Outlook

1.7 2.0

6.2

5.1

7.1

2.1

0.2

5.7 5.4

6.7

United States Europe Emerging and

developing

economies

Sub-Sahara

Africa

Mozambique

Global Growth Projections, 2012

(Percent)

Sep-11 WEO

Apr-12 WEO

Source: World Economic Outlook.


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Mitigating the Impact of the GlobalSlowdown

Authorities are on the right track inadopting countercyclical policies.

Monetary policy : accommodatingstance intended to support theprovision of private sector credit at acritical time;

Fiscal policy : operation of automaticstabilizers to deal with the less favorablescenario for growth and revenuecollection.

Mozambique: Policy discussions Short Term


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Promoting Inclusive and Sustainable Growth

Closing the Infrastructure Gap While Maintaining External Sustainability

Tapping and Managing Natural Resource Wealth to Finance Priority Spending

Scaling-up social protection on a Fiscally Sustainable Basis

Deepening Structural Reforms

Mozambique: Policy discussions Medium Term


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Thank you!www.imf.org/maputo

Mocambican economic outlook

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