Mozambique Economic Outlook

Growth is expected to remain robust in 2012 and 2013 after Mozambique began exporting coal in 2011.
The main short-term challenge is reconciling ambitious infrastructure investment and social safety nets.
Many new entrants to the labour market have to take marginal jobs.

Coal export earnings from the first mining mega-projects that began operations in 2011, coupled with strong performances in the financial services and transport and communications and construction sectors, lifted real Gross Domestic Product (GDP) growth. The resumption of strong foreign direct investment (FDI) inflows, mostly in extractive industries, strong agricultural growth and infrastructure investment are expected to lead to high real growth in 2012 and 2013. The Central Bank’s consistent tight monetary policy, supported by a prudent fiscal policy, cut year-end inflation to low double digit levels in 2011. The favourable framework is expected to contain inflation, allowing room for monetary policy easing in 2012. The roll-out of pro-poor measures prepared during 2011, coupled with an ambitious infrastructure investment programme, should widen the fiscal deficit. Mozambique’s main medium-term challenge is the broadening of its fiscal base as aid flows decrease. Poverty levels seem to be stagnant with 54.7% of the population living below the national poverty line.

Mozambique has a high population growth rate and an estimated 300 000 new entrants into the labour market every year. The country’s high economic growth rates have largely been driven by capital-intensive projects, particularly in the extractive industries. The overall unemployment rate stands at 27%. The formal economy is largely urban and only accounts for about a third of all employment. As a result many new entrants into the labour market are forced into marginal jobs in the informal economy, both in rural and urban areas, with little prospect of secure employment. Youth unemployment is an issue addressed by several government initiatives. However, there is currently no separate youth employment strategy.