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Mozambique Country Risk Report Q3 2018

Mozambique Country Risk Report Q3 2018

Economic growth will accelerate in Mozambique over 2018 owing to low inflation and currency stability. However, growth will remain far below its 2000-2015 trend due to a continued absence of foreign budgetary assistance and weaker tailwinds from the mining sector.

A deal between Mozambique's government and the main opposi-tion party to alter the way that provincial governors are elected will go a long way towards a lasting peace deal between the two sides, though progress towards peace depends heavily on continued negotiations following the death of the opposition's leader, Afonso Dhlakama, in May 2018. We also note that a concomitant change to the means by which municipal mayors are elected, coupled with ongoing economic weakness, will fuel popular frustrations and risks of resultant instability will remain elevated.

Deteriorating terms of trade and an ongoing donor boycott will weigh on Mozambique's current account over the coming quarters. Although we continue to believe that inflows of foreign investment will prevent a balance of payments crisis, the deteriorating outlook for the current account means that the external accounts will remain susceptible to external shocks.

Mozambican inflation will rise gradually over the second half of 2018, as currency weakness against the South African rand and diminishing disinflation from food prices push headline growth higher. Against this backdrop, we expect the monetary authorities' aggressive easing cycle over recent quarters to be paused in H2 as inflation begins to rise.


Executive Summary
Core Views
Key Risks
Chapter 1: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
Until Gas Production Begins
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
External Trade And Investment Outlook
Deteriorating Trade Balance Heightens Exposure To Shocks
Outlook On External Position
TABLE: CAPITAL AND FINANCIAL ACCOUNT BALANCE
TABLE: CURRENT ACCOUNT BALANCE FORECASTS
TABLE: TOP 5 GOODS IMPORTS, 2017
TABLE: TOP 5 GOODS EXPORTS, 2017
Monetary Policy
Window For Easing Closing As Inflation Increases
Monetary Policy Framework
Structural Fiscal Position
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
Currency Forecast
Gradual Depreciation After Short-Term Stability
TABLE: BMI CURRENCY FORECASTS
Chapter 2: 10-Year Forecast
The Mozambican Economy To 2027
Strong Growth On The Horizon But Risks Abound
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 3: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
Positive Steps Towards Peace But Risks Remain
Long-Term Political Outlook
Stability Dependent On Negotiations And Improving Living Standards
TABLE: POTENTIAL RENAMO LEADERS
Chapter 4: Operational Risk
Operational Risk
TABLE: OPERATIONAL RISK
Business Crime
TABLE: BUSINESS RESPONSE TO WHITE COLLAR AND ORGANISED CRIME RISK IN MOZAMBIQUE
Education
Chapter 5: BMI Global Macro Outlook
Key Divergences Emerging In World Economy
TABLE: GLOBAL MACROECONOMIC FORECASTS
TABLE: DEVELOPED STATES – REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS – REAL GDP GROWTH, % y-o-y
TABLE: MOZAMBIQUE – MACROECONOMIC DATA AND FORECASTS

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