Mozambique expects higher economic growth, wider deficit in 2024
Mozambique anticipates a surge in economic growth to 5.5% next year, even as its budget deficit is expected to widen to 10.4% of gross domestic product (GDP). This expansion is attributed to factors such as debt service, public sector wage reforms, and election-related spending, as highlighted by Finance Minister Max Tonela in a budget speech on Wednesday.
These projections contrast with the 2023 targets of 5.0% growth and a budget deficit of 8.7% of GDP. Tonela clarified that the 2024 deficit would be funded through external grants, constituting 5.4% of GDP, foreign loans at 1.9% of GDP, and domestic borrowing amounting to 3.0% of GDP.
The finance minister outlined that the anticipated growth in 2024 would be propelled by various sectors, including extractive industries, agriculture, and finance, among others. This strategic focus aims to drive economic development in Mozambique in the coming year.
Key Takeaways
Mozambique has faced a series of economic challenges over the past decade, including a "hidden debt" crisis, devastating cyclones, and an insurgency linked to Islamic State, primarily concentrated in the gas-rich Cabo Delgado province. Despite these difficulties, the country's economy is gaining momentum, with a growth rate reaching 4.1% in 2022, amid a challenging global context. The positive economic performance can be attributed to the full resumption of mobility, contributing to robust growth in services, and increased agricultural productivity. Additionally, higher external demand and prices for key export commodities, such as coal and aluminum, have further supported the recovery. While the medium-term outlook appears positive, it is important to note that there are substantial downside risks that could impact Mozambique's economic trajectory. The country remains susceptible to various external and internal factors that may pose challenges to sustained growth in the future.
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