Economic Analysis


Population 28.8 million
GDP per capita 392 US$
Country risk assessment
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major macro economic indicators

  2015 2016 2017(f) 2018(f)
GDP growth (%) 6.6 3.8 3.5 4.8
Inflation (yearly average, %) 2.4 19.2 17.5 10.5
Budget balance (% GDP)* -7.2 -5.7 -4.8 -4.5
Current account balance (% GDP) -40.3 -38.2 -42.2 -39.6
Public debt (% GDP) 94.7 127.5 128.1 125.6

* Including grants (f): forecast


  • Favourable geographic location: long coastline, proximity to southern African markets
  • Significant mineral (coal), agricultural and hydroelectric resources
  • Huge offshore gas field discovered in 2010
  • Support from donors and foreign investors (FDI) to finance mining and gas infrastructures (suspended since November 2016)


  • Lack of diversification; dependence on raw material prices (aluminium, coal)
  • Lack of suitable transport and port infrastructures limiting country’s raw material export capacity
  • Scale of grey economy (40% of GDP)
  • Banking system constrained by the government’s financing needs
  • Poor governance
  • Problematic climatic conditions with frequent flooding


Faster growth underpinned by the mining sector

Although growth in 2018 will be faster, it will continue to suffer because of the crisis resulting from the suspension of multilateral aid following the revelation, in April 2016, of hidden (1.4 billion dollars, approximately 10.7% of GDP) being concealed by the government. The result is that the government’s funding needs will take priority over the many, constantly delayed, infrastructure projects such as the Maputo-Catembe bridge initially planned for 2017. The scale of the State’s financial requirements will also dominate the banking sector, to the detriment of providing finance for the private sector. However, the mining sector, in particular coal and aluminium, will help drive economic growth, thanks to the vitality of incoming FDI and a moderate upturn in prices. Increasing demand for precious stones, as well as the start of production in 2017 of the country’s first graphite mine, will help improve the diversity of the country’s exports. The exports of the extractive industry will also feel the benefits of the increase capacities of the rail line linking the mines in the centre of the country with the port of Nacala, where the specialised coal terminal has been expanded. The vitality of external demand, in particular in the eurozone (40% of exports), will also help boost exports. The continuation of the ceasefire between the armed faction of the main opposition party (Renamo) and the government will, if it lasts, enable the farmers in the centre of the country to once again ship their products around the country and abroad. Agriculture will in fact continue to be a key sector for Mozambique, as it accounts for 21% of GDP and employs almost 75% of the workforce. Finally, household consumption is expected to receive a boost from the stronger performances of the agriculture sector, but it will be limited by the continuing high rate of inflation, despite a clear drop.


Major efforts to bring public finances under control in the context of reduced financing

Since the sharp worsening of the budget balance in 2014, the government has continued its policy of fiscal consolidation. This fiscal position could prove hard to maintain because of the ongoing suspension of international aid, which funds 20% of State spending. The implementation of measures aimed at broadening the tax base and improving tax collection services as well as the efforts in terms of expenditure, will nevertheless still not be enough to significantly improve the budget balance. In addition, the holding of local election in 2018 will make it difficult to reduce current expenditure. This means that investment spending could be cut instead. At the same time, public indebtedness (mostly external) has reached a record level, with a government debt interest payment default in January 2017. The hoped for restructuring of this, naturally dependent on the implementation of more severe fiscal consolidation measures, will prove salutary for the country, which also lost its access to the international markets. Although talks with the donors have restarted, the guaranties provided by the government against the borrowings of public sector companies has increased the risk of a sovereign default.

The current account deficit, linked with the scale of imports the country needs to be able to improve its infrastructure (gas, transport), is likely to remain high in 2018. The vigour of mining sector (aluminium and coal) exports will still not be enough to reduce the very large trade deficit. The current account deficit will however be funded thanks to massive FDI inflows in the mining sector, further increased thanks to the opportunities arising from future production of liquefied natural gas, expected in 2022. The Central Bank is also likely to continue its interventions in the markets to try and maintain the managed float of the metical to the dollar, supported by a slight increase in its currency reserves (2.3 months of imports), thanks to these FDI flows.


A fragile political situation and governance weaknesses

As of the parliamentary elections in October 2014, Frelimo, in power since 1994, has had to deal with a vigorous opposition from the leading opposition party, Renamo, both within parliament and on the ground in the form of guerrilla actions in certain provinces in which it is firmly installed and wants to exercise local political power. It would however seem likely that a peace agreement could be signed between the two factions, in so far as Renamo appears to want to take advantage of the declining popularity of President Nyusi in order to win seats in the local elections in 2018, followed by the presidential election in 2019. The scale of social discontent within the country remains a source of political instability, because of continuing high inflation, alongside widespread corruption. The business climate in Mozambique remains difficult. Its performances as measured by the World Bank’s governance indicators are generally below those of its neighbours (with the exception of Zimbabwe). The country has dropped in the rankings, in particular those concerning the rule of law (176th place out of 209 countries in 2016 against 129th in 2010), combating corruption and political stability.


Last update : January 2018

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