Economic Outline

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Mozambique’s economy recorded average growth rates above 7% of GDP over the period 2000-2016, supported by foreign investment, the rapid growth of the mining sector and the increase in coal and hydrocarbon reserves. However, the economy has slowed down, impacted by a sovereign debt crisis, the passage of tropical cyclones and more recently the Covid-19 pandemic. For the first time in thirty years, GDP contracted by -1.2% in 2020 (IMF). Supported by robust growth in agriculture and mining as well as recovery in services as Covid-related restrictions were eased, economic growth resumed modestly in 2021, reaching 2.5%. It is expected to pick up to 5.3% in 2022 and further accelerate to 12.6% in 2023, boosted by the start of liquefied natural gas (LNG) production at the Coral South offshore site (IMF). However, a deterioration of the security situation in the gas-rich Cabo Delgado province, a resumption of the epidemic and the occurrence of natural disasters are downside risks.

As Mozambique was still pursuing its reconstruction efforts after the passage two cyclones, the economy contracted sharply due to the Covid-19 pandemic. The government put in place emergency measures such as increasing health spending, strengthening social protection to the most vulnerable, and supporting micro, small, and medium-sized businesses (IMF), and benefited from emergency funding from the IMF. This prompt and effective response helped the economy to recover in 2021. However, public deficit widened due to increased expenditures linked to the security and humanitarian situation in the north of the country, Covid-related spending and a reform of public sector remuneration (IMF). It amounted to an estimated -6.2% GDP in 2021, and is projected to decrease to -4.5% GDP in 2022 (Coface). Primary fiscal balance is expected to be reached in 2026, after LNG revenues increase (IMF). Public debt, which was already very high, further increased to 133.6% GDP in 2021 (IMF). It is expected to slowly decrease to 127.6% GDP in 2022 and 115.3% GDP in 2023 (IMF), remaining at worrying levels. Progress has been made in debt restructuring but Mozambique remains over-indebted. Inflation increased from an estimated 3.1% in 2020 to 6.2% in 2021, due to seasonal factors, supply-chain constraints and international food and fuel price increases (IMF). Tight monetary stance has helped keep inflation within the central bank’s target of less than 10%. According to IMF estimates, inflation is expected to reach 6.4% in 2022 before declining to 5.5% in 2023. Although foreign exchange and metical reserves have stabilized, the large current account deficit exposes the country to external shocks. The government’s priorities are fiscal consolidation and debt reduction. The 2022 budget includes spending cuts, and the authorities hope to improve tax revenue. A project to create a sovereign wealth fund fuelled by hydrocarbon revenues could help improve the management of the country's resources. The country is holding talks with the IMF for an extended credit facility to help ease its financing burden.

Unemployment rate was estimated at 3.4% in 2020 according to the World Bank (modeled ILO estimate). However, according to the African Development Bank, the unemployment rate was 25% in 2018, and among young people it reached 30%. Social inequalities are increasing and a large part of the population lives in poverty (over 63% according to AFDB), especially in rural areas. The northern province of Cabo Delgado, where more than 800,000 people have been displaced due to terrorism, has been particularly affected by increased food insecurity (IMF).

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