DEVELOPMENT IN THE ECONOMIC ACTIVITY
During the second half of 2014, Mozambique begun showing signs of an economic activity slowdown, which saw a deceleration of growth from 9.0% y/y in the second quarter to 7.8% and 5.6% in the 3Q and 4Q, respectively. Even so, according to the preliminary data published by the National Statistics Office (INE), economic growth for 2014 as a whole still recorded a robust 7.4%, a result mainly owed to a good performance by the mining industry. On a similar note, the public sector performed positively, supporting the economic activity in some strategically important sectors, such as construction.
According to the preliminary data for the first two quarters of 2015, this trend of economic activity deceleration in Mozambique kept throughout the year. Following a 6.9% y/y growth rate for the first quarter of 2015, data published by INE shows that the economic activity decelerated to 5.7% y/y during the 2Q. The floods, which fustigated the country during the early months, did not have the negative impact on the agricultural activity as initially foreseen, with the sector continuing to record favourable growth figures. At the same time, the mining activity expanded considerably, despite the current context of weak commodity external demand and the logistical constraints with the out flow of goods (such as in the case of coal). Simultaneously, we note the recovery of the manufacturing activity, which contributed to strong growth rates in the secondary sector. Regarding the tertiary sector, we highlight the performance of financial services, which contracted in comparison to the 2Q of 2014. This performance ended up off setting the gains made in the transportation and communication sectors. Preliminary data for the 3Q of 2015 place economic growth at 5.9% y/y, which means that GDP growth for the year is unlikely to meet the Government estimate (7.5%, according to the State Budget 2016). On a cumulative basis, GDP for the first three quarters of 2015 recorded a 6.1% growth rate, according to the INE.
The economic climate indicator (ICE, original acronym), which gathers confidence indicators from entrepreneurs in multiple sectors, recorded a slight upwards trend during the 3Q of 2015. This rebound in business confidence is primarily owed to a strong outlook for future employment creation, even if confidence in future demand has proved less optimistic. Despite this rebound, we also note some pessimism related to the development of prices, which have kept on a downward trend for two consecutive quarters, driven by deflationary expectations from commerce sector, housing, restaurants and similar.
On a sectorial basis, this slightly more favourable outlook is mainly owed to increased confidence levels in both the manufacturing and transports sectors. For the former, all business confidence variables record improvements from the preceding quarter, with the most substantial improvements being recorded in the job creation and business volume outlooks. Even so, survey respondents note that tough competition, lack of raw materials and equipment obsolesce continue to be the main factors hindering their activity. The transportation sector benefited from a significant increase in business volume and the outlook for short-term job creation, which thus lead to an improved outlook on future business. Despite this, the transports sector continues to be hinder by high operational costs, a highly competitive market and lack of demand.