Africa Connected

Recovery of Mozambique economy predicted for 2017

Standard Bank and 702 have sent acclaimed journalist Nikiwe Bikitsha across the continent to provide insights into Africa's markets. She chats to Standard Bank Chief Economist in Mozambique Fausio Mussa about the state of the country's economy.

He says this has been a difficult and challenging year for Mozambique.

Mozambique used to produce single digit inflation for many years, a relatively stable currency for a long period as well...but this year we have experienced unprecedented levels of depreciation.

Fausio Mussa, Chief Economist for Standard Bank in Mozambique

But, he says, fortunately they are starting to see some change and improvement, and it would seem that the worst is over with regards to depreciation of the metical.

We see some signals of resilience.

Fausio Mussa, Chief Economist for Standard Bank in Mozambique

When we look at foreign direct investment statistics, it remains roughly around $3 billion.

Fausio Mussa, Chief Economist for Standard Bank in Mozambique

What impact has the depreciation of the metical and subsequent rise in inflation had on the country?

Recent studies show that Mozambique remains quite a poor country, though Moosa says poverty levels have improved.

We running roughly 45% poverty level rates for the population.

Fausio Mussa, Chief Economist for Standard Bank in Mozambique

But like neighbouring countries in the region, the el Niño drought effect has had a devastating impact on agriculture in Mozambique, particularly in the southern area.

People are having a difficult time, when you realise that most families live on subsistence agriculture.

Fausio Mussa, Chief Economist for Standard Bank in Mozambique

In urban areas, people are constrained by currency depreciation and increased inflation, he says.

Disposable income has reduced substantially, and people are having a really difficult time.

Fausio Mussa, Chief Economist for Standard Bank in Mozambique

I see hope in the future, but there are a lot of things that need to be resolved - from the political side, from the economic point of view - it seems that we still need tight policies in the months to come before we can say we have achieved macroeconomic stability.

Fausio Mussa, Chief Economist for Standard Bank in Mozambique

Mussa says about half of foreign direct investment is mainly going into the traditional mining sector and related transport.

And the discovery of gas has been one of the country's good news stories.

There was also substantial investment in the southern region, which was for the gas project.

Fausio Mussa, Chief Economist for Standard Bank in Mozambique

He says it is still early days, but it has definitely improved investor sentiment. It will however take time before people feel the positive impact of the gas find.

And future outlook for the economy?

In terms of GDP we remain less optimistic than the authorities...we believe the economy has not bottomed yet. We see some signals of currencies appreciating and stabilising, but it is going to take some time until the economy starts to recover.

Fausio Mussa, Chief Economist for Standard Bank in Mozambique

There is typically a lag between what macroeconomic indicators show, and the reality on the ground.

Only towards the second half of next year, we may talk about an improvement in the economic situation.

Fausio Mussa, Chief Economist for Standard Bank in Mozambique

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