Mozambique will have to wait until 2023 to achieve economic growth of 7.5%, a rate it was used to in the not too distant past, according to forecasts by the Economist Intelligence Unit (EIU).
In the latest report on the country, which covers the period between 2018 and 2023, the EIU analyst expects a smooth progression of the growth rate, which from 5.0% in 2022 is projected to increase by 2.5 percentage points the following year, when the beginning of exploration of large deposits of natural gas is expected.
In 2018 the EIU projects growth of 3.5%, but the following year forecasts a small contraction to 3.4%, driven by the fact that agricultural producers will find it difficult to obtain financing as well as the drop in coal prices.
The fall in coal prices will be a further disincentive to the expansion of mining production after in 2017 it witnessed a near doubling of production, the statement said.
The report said that the government’s financial problems, coupled with late payments to state suppliers, will continue to play a significant role in the banking system and undermine the confidence of potential investors.
The same document predicts that gross fixed capital formation, or investment, which this year is expected to fall by 12.5%, will recover to a positive rate of 8.2% in 2019, and then jump to rates of between 60.0% in 2020 and 35% in 2023.
This development in investment stems from the construction of the infrastructure that the consortia of Area 1 and Area 4 are carrying out and will continue to carry out so that by 2023 the first natural gas to be extracted in the Rovuma basin will begin to be liquefied for Asian markets.
The EIU report also mentions the issue of hidden debts and their payment, as well as the second process of restructuring bonds issued by the Mozambican tuna company Ematum, backed by the State, noting there is some evidence of progress.
The EIU noted the announcement made by the Ministry of Economy and Finance regarding the agreement reached with four of the main creditors (holding 60.0%) of the issue of Eurobonds, maturing in 2023, but recalled that this agreement needs the approval of 75% of bondholders as well as the country’s parliament.
The agreement also represents only a small part of Mozambique’s debt, since the US$1.2 billion in loans taken out by companies also controlled by the country’s secret services Mozambique Asset Management and ProIndicus are still to be resolved.
The report recalls that Prime Minister Carlos Agostinho do Rosário has already announced that the government will not repay these loans, despite the State guarantee, leaving the companies that have contracted them responsible for their repayment.