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  4. > Mozambique Business Forecast Report Q1 2015

Mozambique Business Forecast Report Q1 2015

  • November 2014
  • -
  • Business Monitor International
  • -
  • 32 pages

Core Views

Opposition concerns about the Mozambican election’s credibility are shared by many observers, but the result – a victory of ruling party Frelimo – will not be overturned. A negotiated settlement, which gives Renamo leaders more status, will nonetheless be necessary. The chances of a successful agreement are bolstered by the consensusbased approach President-elect Felipe Nyussi. Mozambique’s growth forecasts are unchanged following the ruling party’s widely expected victory at the October 2014 elections. However, the strong performance of the opposition increases security and policy risks, and these could result in lower growth than we are
currently forecasting.

Mozambique’s monetary policy committee will cut rates by 25 basis points to 8.00% in 2015 as it balances low inflation and growth concerns against an uncertain outlook for the currency. A pronounced slowdown for economic growth would lead to more aggressive cuts, however.
The outlook for Mozambique’s external accounts has been clouded by falling prices for coking coal, an increasingly important export. However, the impact of this will be offset by lower oil prices which will constrain the growth of the import bill and the net effect will therefore be marginal.

Table Of Contents

Mozambique Business Forecast Report Q1 2015
Executive Summary 5
Core Views 5
Key Risks To Outlook 5
Chapter 1: Political Outlook 7
SWOT Analysis 7
BMI Political Risk Index 7
Domestic Politics 8
Frelimo Victory To Be Confirmed, Negotiations Ahead 8
Opposition concerns about the Mozambican election's credibility are shared by many observers but the result - a victory of ruling party
Frelimo - will not be overturned. A negotiated settlement, which gives Renamo leaders more status, will nonetheless be necessary. The
chances of a successful agreement are bolstered by the consensus-based approach President-elect Felipe Nyussi.
Table: Political Overview 8
Long-Term Political Outlook 9
Poverty And Corruption At The Top Of The Agenda 9
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 11
SWOT Analysis 11
BMI Economic Risk Index 11
Economic Activity 12
Growth Outlook Undimmed By Election Result 12
Mozambique's growth forecasts are unchanged, following the ruling party's widely expected victory at October 2014 elections. However,
the strong performance of the opposition increases security and policy risks and these could well result in lower growth than we are
currently forecasting.
Table: Economic Activity 12
Balance Of Payments 13
Coal Price Declines To Have Limited Impact On External Accounts 13
The outlook for Mozambique's external accounts has been clouded by falling prices for coking coal, an increasingly important export.
However, the impact of this will be offset by lower oil prices which will constrain the growth of the import bill and the net effect will
therefore be marginal.
Table: Current Account 14
Monetary Policy 15
Cautious Monetary Policy To Persist 15
Mozambique's monetary policy committee will cut rates by 25 basis points to 8.00% in 2015 as it balances low inflation and growth
concerns against an uncertain outlook for the currency. A pronounced slowdown for economic growth would lead to more aggressive
cuts, however.
Table: Monetary Policy 15
Banking Sector 16
Financial Inclusion A Major Banking Sector Challenge 16
The outlook for Mozambican banking sector asset growth is bright owing to low penetration and a robust economic growth outlook.
However, challenges in accessing finance and deficient physical infrastructure mean asset growth will come from service offered to
large corporates rather than small and medium enterprises and individuals.
Chapter 3: 10-Year Forecast 19
The Mozambican Economy To 2023 19
Natural Resource Boom Ahead 19
Mozambique has seen 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 19
Chapter 4: Operational Risk 21
Operational Risk Index 21
Operational Risk 22
Table: Operational Risk 22
Transport Network 23
Tab le: Sub -Saharan Africa - Transport Networ k Ris k 24
Economic Openness 27
Tab le: Sub -Saharan Africa - Economic Openn ess Ris k 28
Table: Product Imports 29
Chapter 5: BMI Global Assumptions 31
Global Outlook 31
Reality Check: Uncertainty Reigns 31
Table: Global Assumptions 31
Tab le: Develop ed Stat es, Real GDP Gro wtH, % 32
Tab le: BMI VE RSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, % 32
Tab le: Em erging Mar kets , Real GDP Gro wth , % 33

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