"There seems not to be major risks to growth, as there is some insulation against the international financial crisis. This would only become more evident by any difficulties in funding through international donations or in terms of Foreign Direct Investment (FDI), or any greater braking of production in the industrial complex of Mozal, factors that seem relatively controlled," stated the bank.
The current growth predictions for this year - between 4% and 4.5% - are "comfortable" and even "very positive", given the "global recessionary outlook," says the document from the Department of Economic and Financial Studies, signed by Joao Victor de Sousa and Paula Carvalho. The Mozambican economic growth is slowing down from 8.7% in 2006 to 7.6% in 2007 and 6.8% in 2008, according to official statistics.
Last year, the agriculture sector contributed the most to GDP growth (30%), showing "strong momentum due to the priority that has been given by authorities for its development.” Transport and Communications (25%) comes at second place, followed by Commerce (10.8%) and Financial Services (9.4%).
This year, the loss of activity in the transport of goods for exportation, particularly iron ore (less than 30% in the first months of the year) due to the slump in demand by Asian countries, particularly China and India is visible.
The economic slow down "will be felt mainly through a contraction of programmed investment and also set the fall in exports, particularly of aluminum, because of its still considerable weight in production and the external balance,” read the document.
International donors have made a commitment until 2010, with donations that account for approximately 14.5% of GDP and 50% of revenue, funding "the state expenses" and "boosting the investment". The government has sought to develop strategies to mitigate the harmful effects of the crisis, as demand for alternative destinations for most affected exports, in addition to the ongoing effort of formalisation of economic activity, to generate a more sustainable basis for expansion of the state accounts.
The inflation rate moved "positively", thanks to falling oil prices and food in the international market and the prospects of good agricultural harvests at domestic level, "although the exchange rate developments threaten to obstruct [the] path". Another comfort factor is the prospect of access to the IMF credit line against external shocks, to cope with the loss of exports and depreciation of the Metical.
As for major projects, while some were postponed, as with the Moatize Heavy Sands project and some reduced in scale (Mozal, Moma), there are also increases in production (Sasol) and even "buzzing" business activities such as Tete coal, the Sena railway line (Caia-port of Beira), oil exploration in Rovuma and the second dam over the Zambeze river.
In the medium and long term there remains "some reluctance" because of "the apparent absence of strong convictions about the way forward" to reduce dependence on overseas, particularly to international donations. The "generally positive" evaluation of BPI is made following a visit to the country, the first since 2007, emphasising the promotion of trade and movement of goods and services, along with the "ease of pedestrian movement and almost total lack of sense of insecurity, "which promotes the business climate.
