Mozambique Forecast Report Q2 2009 : Market Research Report

Mozambique Forecast Report Q2 2009

Published by: Business Monitor International

Published: Apr. 2, 2009 - 55 Pages

Executive Summary: Riding out The external Storm in an election Year
Chapter 1: Political outlook: SWOT analysis; BMI Political Risk Ratings; Domestic Politics; Frelimo election Victory a Near Certainty; The ruling party in Mozambique is an odds-on bet to sweep to another landslide victory in the general election later; this year.
TABLE: POLITICAL OVERVIEW: Foreign Policy; Refugee Influx Threatening Social Stability; Mozambique maintains cordial diplomatic relations with other countries, but political imbalances in some Southern; African states are creating strong pressures on internal social stability, not least because of the influx of refugees from; troubled adjacent states.
Chapter 2: economic outlook: SWOT analysis; BMI economic Risk Ratings; Introduction; Economic activity; Robust But Not Immune; A slump in global demand for hard commodities and weather shocks to domestic agriculture will combine to slow; economic growth this year and in 2010, but the economy will still expand at a stable pace as long as donors maintain; their substantial level of support.
TABLE: ECONOMIC ACTIVITY: Monetary Policy; Central bank Holding The Fort; Monetary policy aims to keep inflation as low as possible, mainly using techniques that keep under control the large; amounts of forex in the economy.
TABLE: MONETARY POLICY: Balance of Payments; Bottom Line Remains Sound, Thanks To aid; The external account outlook is promising, but overwhelmingly reliant on continued support from donors and; international development agencies.
TABLE: BALANCE OF PAYMENTS: Exchange Rate Policy; Downward Slide Will Continue; The metical will continue to move down against the greenback and the euro, but will remain more robust against the rand.
TABLE: EXCHANGE RATE POLICY
Chapter 3: 10-Year Forecast: The Mozambican Economy To 2018; Strong Growth, but From Low base; Mozambique has witnessed consistently spectacular rates of real GDP growth since the end of the civil war in 1992,; averaging 8.4% between 1993 and 2007, driven by the first generation of post-conflict reforms.
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 4: Special Report: China; a Seismic upheaval in 2009?; One of the biggest - and least discussed - ‘wild cards’ that could rear its head in 2009 is dramatic political upheaval; in China.; United States; Europe; Big Trouble For European Banks In 2009; The deteriorating global macroeconomic outlook, high levels of leverage, and a broken business model will combine; to spell trouble for the financial services sector in 2009.
TABLE: BANKS’ LEVERAGE RATIOS
TABLE: ASSETS AS % OF HOME COUNTRY GDP
TABLE: ASSETS AS % OF HOME COUNTRY GDP WHEN EUROZONE IS CONSIDERED ‘HOME COUNTRY’
TABLE: EXPOSURE AS % OF TOTAL EXPOSURE TO REGION
TABLE: BANKS’ FOREIGN EXPOSURE (US$ MN)
TABLE: EXPOSURE AS % OF NATIONAL GDP
Chapter 5: business environment: SWOT analysis; BMI business environment Risk Ratings; Business environment outlook
TABLE: BMI BUSINESS AND OPERATIONAL RISK RATINGS
TABLE: BMI LEGAL FRAMEWORK RATINGS: Institutions; Infrastructure
TABLE: MIDDLE EAST & AFRICA ANNUAL FDI INFLOWS
TABLE: BMI TRADE RATINGS: Market orientation
TABLE: TOP EXPORT DESTINATIONS: Operational Risk
Chapter 6: BMI Global Assumptions: Global Outlook .51
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES
TABLE: EMERGING MARKETS

Abstract

Riding out The external Storm in an election Year

A general election is due by the end of the year, but there is little doubt that the incumbent Frentede Libertacao de Mocambique (Frelimo) party will emerge dominant, with President ArmandoGuebuza returned for his second (and last) five-year term. Frelimo delivers on macroeconomicpolicy, which keeps the donor tap open, but the polity is still flawed, with corruption, administrativeinefficiencies and politically driven regional biases undermining the country’s fledgling democracy.Matters are not helped by the fractious and negative stance of the opposition, which fails to inspireany widespread popular enthusiasm. But given that Mozambique was, less than 20 years ago,embroiled in a bloody civil war, the country is rightly regarded as one of the success stories amongpost-conflict states in Africa.

Donors are key to the viability of the budget and external accounts, and maintaining their confidenceand support is the over-riding risk consideration. Mozambique has benefited from large FDI inflowsin natural resource projects, but these are going through a difficult period due to the slump in theglobal economy. Yet FDI interest in Mozambique remains bullish, and there are still opportunitiesin sectors such as coal, natural gas and hydropower on the FDI radar screen. However, urgentattention needs to be given to the electricity sector, where historical contracts have created abizarre situation in which Mozambique has to re-import its own generated output in order to feedthe power needs of mega-projects such as the Mozal aluminium complex.

We expect real GDP growth to average 5.8% range through our forecast period, with inflation atthe upper-end of single-digit territory. External payment risk will remain manageable on the provisothat international confidence and support is maintained. The most likely trajectory for the meticalis a continuing gentle downward slide on a trade-weighted basis, with recent strength against therand continuing over the short term.

Official policy recognises the need to upgrade the contribution of the domestic private sector tosocio-economic development. Policy reforms are taking place to make it easier to establish andoperate enterprises, but entrepreneurs still face major hurdles in terms of official interference,corruption, and gaining access to seed and working finance. Furthermore, the country’s physicalinfrastructure is in many places inadequate. That said, the government has launched major plansto upgrade the country’s two main ports, part of its railway network, seaports and airports whichwill improve trade, as well as expanding its power generation capacity.

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Mozambique Forecast Report Q2 2009

Table of Contents

Abstract