OverviewMozambique borders Tanzania, Malawi, Zambia, Zimbabwe, South Africa, and Eswatini. Its long Indian Ocean coastline of 2, 500 kilometers faces east to Madagascar. About two-thirds of its estimated 32 million (2021) people live and work in rural areas. The country is endowed with ample resources of arable land, water, and energy, as well as mineral resources and newly discovered natural offshore gas; three, deep seaports; and a relatively large, potential pool of labor. It is also strategically located; four of the six countries it borders are landlocked and hence dependent on Mozambique as a conduit to global markets.
A modest rebound in growth in 2021 reflected the combined outcome of recovery in agricultural growth and a relatively strong recovery in services, on the one hand, and weak performance in extractives and manufacturing, on the other. Mozambique’s 2022 Economic Update notes growth is expected to accelerate in the medium term, averaging 5. 7% between 2022 and 2024, as demand recovers further and the economy benefits from the start of LNG production in 2022 and anticipates the resumption of larger LNG projects. These are expected to stimulate the extractives sector, increase demand for services, and boost exports.
A modest rebound in growth in 2021 reflected the combined outcome of recovery in agricultural growth and a relatively strong recovery in services, on the one hand, and weak performance in extractives and manufacturing, on the other. Mozambique’s 2022 Economic Update notes growth is expected to accelerate in the medium term, averaging 5. 7% between 2022 and 2024, as demand recovers further and the economy benefits from the start of LNG production in 2022 and anticipates the resumption of larger LNG projects.
Mozambique’s strong ties to the region’s economic engine, South Africa, underscore the importance of its economic, political, and social development to the stability and growth of southern Africa as a whole. Political ContextThe Front for the Liberation of Mozambique (Frelimo) and the Mozambican National Resistance (Renamo) remain the country’s main political forces, followed by the Mozambique Democratic Movement (MDM).
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Development ChallengesDespite having one of the fastest growing economies in Sub-Saharan Africa from 2000-2015, job-creation, poverty reduction, and human capital accumulation were limited, with most of the substantial wealth generated benefiting limited sections of the economy. With a human capital index of 0. 36, extremely low levels of human capital are a structural constraint to rapid, inclusive, and sustainable growth in Mozambique.
Frelimo won in a landslide in both the 2019 presidential and legislative elections, securing a two-thirds majority in the national assembly. Frelimo also won provincial elections, held for the first time in the same year, thus appointing governors in all the country’s 10 provinces. The last municipal elections took place in 2018. Frelimo came up largely victorious in these too, winning 44 out of 53 cities and towns across the country. Renamo won eight municipalities in the central and northern, most populous provinces, while MDM retained its stronghold in the strategic, central, port city of Beira. Mozambique will hold its sixth municipal elections in October 2023, marking the beginning of another electoral cycle that will culminate in the presidential, legislative, and provincial elections a year later in October 2024.
Agricultural output growth is expected to remain significant, subject to favorable weather. However, substantial downside risks remain, including rising international oil and wheat prices owing to the war in Ukraine, natural disasters, and a deterioration in the security situation in northern Mozambique, which may increase public spending pressures, among others.
Mozambique is still grappling with a military insurgency in parts of the gas-rich province of Cabo-Delgado; the four-year conflict has caused an estimated 4, 000 deaths and displaced nearly one million people. About four million people are likely to face high levels of food insecurity as a result of the combined effects of climate shocks and the conflict, which is also threatening the economic potential of lucrative Liquified Natural Gas (LNG) investments in the area.
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The arrival of regional troops has helped stabilize the situation to a degree. The government approved a reconstruction plan for the province, as well as the Programa de Resiliência e Desenvolvimento Integrado do Norte de Moçambique (PREDIN). The latter is a short- to medium-term approach to conflict prevention and conflict mitigation, social cohesion and resilience, intended for Cabo Delgado, Niassa, and Nampula provinces. Economic OutlookMozambique saw its first economic contraction in almost three decades in 2020, owing to the COVID-19 pandemic that hit the services and extractive sectors hard.
OverviewMozambique borders Tanzania, Malawi, Zambia, Zimbabwe, South Africa, and Eswatini. Its long Indian Ocean coastline of 2, 500 kilometers faces east to Madagascar. About two-thirds of its estimated 32 million (2021) people live and work in rural areas. The country is endowed with ample resources of arable land, water, and energy, as well as mineral resources and newly discovered natural offshore gas; three, deep seaports; and a relatively large, potential pool of labor. It is also strategically located; four of the six countries it borders are landlocked and hence dependent on Mozambique as a conduit to global markets. Mozambique’s strong ties to the region’s economic engine, South Africa, underscore the importance of its economic, political, and social development to the stability and growth of southern Africa as a whole. Political ContextThe Front for the Liberation of Mozambique (Frelimo) and the Mozambican National Resistance (Renamo) remain the country’s main political forces, followed by the Mozambique Democratic Movement (MDM).
The arrival of regional troops has helped stabilize the situation to a degree. The government approved a reconstruction plan for the province, as well as the Programa de Resiliência e Desenvolvimento Integrado do Norte de Moçambique (PREDIN). The latter is a short- to medium-term approach to conflict prevention and conflict mitigation, social cohesion and resilience, intended for Cabo Delgado, Niassa, and Nampula provinces. Economic OutlookMozambique saw its first economic contraction in almost three decades in 2020, owing to the COVID-19 pandemic that hit the services and extractive sectors hard.
Basic services in education and health are unevenly delivered across the country, driving spatial inequalities, with limited mechanisms to protect the most vulnerable from the impacts of shocks, thus driving fragility, instability, and violence. The lack of availability of good training and weak links between supply and demand compound a weak labor market and low productivity growth. Disempowerment among girls and women hinders growth through unfavorable levels of fertility, high child and maternal mortality, low levels of skills among women, and the poor productivity of women in the labor market.
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Frelimo won in a landslide in both the 2019 presidential and legislative elections, securing a two-thirds majority in the national assembly. Frelimo also won provincial elections, held for the first time in the same year, thus appointing governors in all the country’s 10 provinces. The last municipal elections took place in 2018. Frelimo came up largely victorious in these too, winning 44 out of 53 cities and towns across the country. Renamo won eight municipalities in the central and northern, most populous provinces, while MDM retained its stronghold in the strategic, central, port city of Beira. Mozambique will hold its sixth municipal elections in October 2023, marking the beginning of another electoral cycle that will culminate in the presidential, legislative, and provincial elections a year later in October 2024.
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These are expected to stimulate the extractives sector, increase demand for services, and boost exports. Agricultural output growth is expected to remain significant, subject to favorable weather. However, substantial downside risks remain, including rising international oil and wheat prices owing to the war in Ukraine, natural disasters, and a deterioration in the security situation in northern Mozambique, which may increase public spending pressures, among others. Development ChallengesDespite having one of the fastest growing economies in Sub-Saharan Africa from 2000-2015, job-creation, poverty reduction, and human capital accumulation were limited, with most of the substantial wealth generated benefiting limited sections of the economy. With a human capital index of 0. 36, extremely low levels of human capital are a structural constraint to rapid, inclusive, and sustainable growth in Mozambique.
Mozambique is still grappling with a military insurgency in parts of the gas-rich province of Cabo-Delgado; the four-year conflict has caused an estimated 4, 000 deaths and displaced nearly one million people. About four million people are likely to face high levels of food insecurity as a result of the combined effects of climate shocks and the conflict, which is also threatening the economic potential of lucrative Liquified Natural Gas (LNG) investments in the area.
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