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· Outlook for Mozambique for 2021 remains negatively affected by Covid-19 uncertainty, security challenges, a fragile fiscal position and limited space for monetary policy support
· Analysts say most likely the economy will rough up recession during Q2:21, with GDP growth expected to average 2% y/y for the whole year
Following a challenging year in 2020, the outlook for Mozambique for 2021 remains negatively affected by Covid-19 uncertainty, security challenges, a fragile fiscal position and limited space for monetary policy support. Analysts say most likely the economy will rough up recession during Q2:21, with GDP growth expected to average 2% y/y for the whole year.
The rise in inflation in 2021, economists say will likely remain modest towards an average of 5.6% y/y, driven by subdued aggregate demand.
The Central Bank of Mozambique reported at mid-December that the foreign exchange market enjoys adequate levels of liquidity. The banking system purchased US$5.01bn in the domestic market, against sales of US$4.95bn, resulting in net purchases of US$72m. This aggregate data does not capture the weekly supply demand imbalances the foreign exchange market experiences.
The Central Bank is likely to maintain foreign exchange rate flexibility as a tool to help protect foreign exchange reserves. Gross foreign exchange reserves remained relatively stable since the end of 2019, with a gross balance close to US$3.9bn, which represents nearly 7 months of import cover, excluding the large projects imports.
