Macro Forum: The Street View




GDP growth slowed to 3.2% in Q3 2018 from 3.4% in the previous quarter. Growth in manufacturing and services was disappointing, however, the agriculture sector saw an increase in activity. However, the industrial sector was the star performer over the first three quarters of 2018, growing 4.1% year-on-year, with the mining subsector expanding by 11% year-on-year. The medium term outlook remains relatively positive despite immediate internal challenges surrounding the continuing impact of the debt scandal and external economic headwinds. GDP is expected to be 3.6% and 3.4% in 2018 and 2019 respectively.

December’s inflation data showed a decrease to 3.5% compared to 4.3% in November 2018. Price pressure was kept in check by the falling costs of transportation, furnishings and other household items in addition to housing and utilities. In 2018, inflation averaged 3.9% compared to 15.4% in 2017. Prices in the food and non-alcohol index were stable and were main drivers behind the muted inflation trend in 2018. Headwinds to the stable inflation outlook include adverse weather patterns impacting on the price of food as well as an increase in global oil prices and in government spending. Inflation is expected to average 4.1% and 6.2% in 2018 and 2019 respectively. In December, the Monetary Policy Interest rate (MIMO) was decreased by 75bps to 14.25%. The pace of rate cuts was increased with the MIMO being reduced by a cumulative 525bps since the start of 2018 and by 900bps since April 2017. The increased pace of rate cuts is expected to help boost the economy.

In the first half of 2018, the current account deficit showed a substantial widening of 35% to US$1.6bn and is set to widen to US$3.7bn in 2018, with further widening to US$4.8bn in 2019, because of a substantial increase of LNG investment-related imports.

The MZN depreciated by 1.9% from MZN60.48 to the US$ at the beginning of the quarter to MZN61.63 to the US$ at the end of the quarter


The former Minister of Finance was arrested in Johannesburg for the fraud that occurred in 2016 and resulted in the debt scandal. Former bankers who arranged the fraudulent funding are also under serious investigation. This is the first direct signal that real action is being taken against the perpetrators.




Real GDP Growth

Source: International Monetary Fund

Mozambique FX vs FV

Source: Bloomberg Spot Prices and Actis methodology for Fundamental Value


Source: International Monetary Fund