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Mozambique Business Forecast Report Q4 2014

  • August 2014
  • -
  • Business Monitor International
  • -
  • 35 pages

Core Views
A ceasefire agreement between Renamo and Frelimo bodes well for political stability in the lead-up to the October election. However, the agreement’s long-term effectiveness will depend on its details – which were not available at the time of writing – and on the extent to which it is implemented once the elections have passed.
The ceasefire agreement bodes well for long-term economic growth. We have not made any upward adjustments to our forecasts as we had always believed that the low-level conflict would have a very limited impact on the economy, but the downside risks to our forecasts have decreased markedly.

Large deficits for the trade and services accounts will keep Mozambique’s current account deeply in the red over the coming years. However, an increasingly diversified export basket and continued foreign direct investment inflows mean that we see little threat of a balance of payments crisis. The Mozambican metical will remain stable over the next two years thanks to rising reserves, low inflation and prudent domestic monetary policy. The risks are to the downside, however, and stem from the country’s massive current account deficit. We have raised our current account deficit forecast for 2011 to 8.0% of GDP from 6.6% previously on account of surging imports in the
first half of the year, driven by loose monetary policy at home and higher global commodity prices.

Table Of Contents

Mozambique Business Forecast Report Q4 2014
Executive Summary 5
Core Views...5
Key Risks To Outlook5
Chapter 1: Political Outlook.. 7
BMI Political Risk Ratings.. 7
SWOT Analysis 7
Domestic Politics 8
Ceasefire Agreement Positive For Electoral Stability....8
A ceasefire agreement between Renamo and Frelimo bodes well for political stability in the lead-up to the October election. However,
the agreement's long-term effectiveness will depend on its details - which were not available at the time of writing - and on the extent to
which it is implemented once the elections have passed.
Table: Political Overview ....8
TABLE: MDM PERFORMANCE IN TEN LARGEST CITIES*..9
Long-Term Political Outlook. 10
Poverty And Corruption At The Top Of The Agenda...10
Frelimo's dominance of the Mozambican political landscape bodes well for policy continuity, although the lack of a credible opposition
party reduces the scope for checks and balances to ensure accountability and transparency. This means that corruption, which is rife
in all levels of Mozambican society, is one of the most difficult and pressing issues to be addressed over the coming decade. Poverty
reduction and ensuring that all income groups and regions benefit from economic development are similarly serious concerns for the
government.
Chapter 2: Economic Outlook.. 13
BMI Economic Risk Ratings.. 13
SWOT Analysis... 13
Economic Activity... 14
Downside Risks To Growth Decreased By Ceasefire Agreement..14
A ceasefire agreement between the government and opposition force Renamo bodes well for long-term economic growth. We have not
made any upward adjustments to our forecasts as we had always believed that the low-level conflict would have a very limited impact
on the economy, but the downside risks to our forecasts have decreased markedly.
TABLE: Economic Activity14
Balance Of Payments .. 15
Current Account Shortfall Large But Sustainable...15
Large deficits for the trade and services accounts will keep Mozambique's current account deeply in the red over the coming years.
However, an increasingly diversified export basket and continued foreign direct investment inflows mean that we see little threat of a
balance of payments crisis.
TABLE: Current Account.16
Exchange Rate Policy . 17
MZN: Stability To Remain Despite Downside Risks17
The Mozambican metical will remain stable over the next two years thanks to rising reserves, low inflation and prudent domestic
monetary policy. The risks are to the downside, however, and stem from the country's massive current account deficit.
table: BMI Mozambican Metical CURRENCY FORECAST..18
Banking sector .. 19
Banking Sector Opportunities Segmented....19
The Mozambican banking sector will continue expanding rapidly over the next five years thanks to a low base and rapid economic
expansion. Corporate and investment banking services for large projects will be the engine of banking sector growth. Retail and SME
expansion will be con strained by several obstacles.
Chapter 3: 10-Year Forecast 21
The Mozambican Economy To 2023.... 21
Natural Resource Boom Ahead..21
Mozambique has witnessed consistently spectacular rates of real GDP growth since the end of the civil war in 1992, averaging 8.0
%between 1993 and 2011, driven by the first generation of post-conflict reforms. Prudent macroeconomic and fiscal management and an
investment-orientated president determined to reduce the country's dire level of poverty, Armando Guebuza, will, in our opinion, help
sustain ongoing robust average annual GDP growth at around 10.0% over the coming decade.
TABLE: Long-Term Macroeconomic Forecasts ..21
Chapter 4: Business Environment 23
BMI Business Environment Risk Ratings 23
SWOT Analysis... 23
Business Environment Outlook. 24
Institutions 24
TABLE: BMI BUSINESS AND OPERATION RISK RATINGS....24
Table: BMI LEGAL FRAMEWORK RATING....25
Table: LABOUR FORCE QUALITY..26
Infrastructure. 27
TABLE: AFRICA - ANNUAL FDI INFLOWS.27
Market Orientation... 28
Table: TRADE AND INVESTMENT RATINGS29
Operational Risk. 30
TABLE: TOP EXPORT DESTINATIONS, 2004-2011, US$mn..30
Chapter 5: BMI Global Assumptions. 33
Global Outlook.... 33
US Revision Drags Down Forecast.33
Table: Global Assumptions33
Table : Developed States , Real GDP Growt H, %..34
Table : BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %.. 34
Table : Emerging Mar kets , Real GDP Growth , %.35

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