Mozambique Business Forecast Report Q3 2012 - new country guide report published
2012-11-14 20:50:57 - Mozambique Business Forecast Report Q3 2012 - a new country guide report on companiesandmarkets.com
We believe that the Mozambican economy will expand strongly in 2012 and the years thereafter, despite the global economic headwinds. An attractive investment profile, a diverse natural resource base and a stable domestic macroeconomic climate will lead to growth of 7.5% in 2012 and 7.8% in 2013, according to our forecasts. We maintain our view that the Mozambican monetary authorities
will cut rates by a total of 300 basis points over the course of 2012 â implying 150bps of further cuts in the June to December period.
Although low inflation and concerns about the health of the global economy ostensibly provide the leeway and incentive for further cuts, we believe that memories of rapidly rising inflation in 2010 will lead the authorities to proceed with caution. News that donor groups will continue to provide budget assistance to the Mozambican government in 2013 is positive for the country´s fiscal accounts. Looking further ahead, we believe that strong domestic revenue growth will see the authorities rely less and less on foreign assistance.
Major Forecast Changes
An upward revision to our oil price forecasts for 2012 and 2013 combined with an expectation for softer aluminium prices over the next two years means that we see Mozambique´s current account deficit growing sharply in 2012 and 2013. After coming in at an estimated US$1.2bn (9.5%) in 2011, we believe the shortfall will increase to US$1.4bn (9.7% of GDP) in 2012 and then to US$1.5bn in 2013.
Risks To Outlook
A failure to address deficient infrastructure is the most pressing risk to our upbeat view on the Mozambican economy. Transport infrastructure in particular is currently inadequate to get Mozambique´s natural riches to international markets. Failure to address this would negatively impact our expectation that exports will be a major driver of growth over the coming years. Insufficient infrastructure investment would also have an impact on Mozambique´s external accounts and risks prolonging high and ultimately unsustainable current account deficits. The weather is also a major risk. Much of southern and central Mozambique is prone to flooding, which can have a devastating impact on the economy. The country also remains a net food importer and therefore remains susceptible to regional weather and food supply shocks.
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