MOZAMBIQUE
Table 1

Key conditions andchallenges

2023

Population, million

33.9GDP, current US$ billion

21.4

GDP per capita, current US$632.5

International poverty rate ($2.15)

a74.5
a88.6

a96.1

Lower middle-income poverty rate ($3.65)
Upper middle-income poverty rate ($6.85)
Gini index

a50.5

School enrollment, primary (% gross)b121.2

b59.3

Total GHG emissions (mtCO2e)

106.1

Life expectancy at birth, years

Source: WDI, Macro Poverty Outlook, and official data.
a/ Most recent value (2019), 2017 PPPs.
b/ Most recent WDI value (2021).

Economic recovery gained momentum in
2023, with real GDP growth reaching 5percent, largely driven by liquefied natural gas (LNG) production. The country isgrappling with substantial fiscal pressures arising from the high public sector
wage bill and increasing debt service cost.
Growth is projected to remain at 5 percent over the medium term, while poverty
is projected to decline from 73.4 percent
in 2023 to 70.9 percent in 2026. Downside risks include volatility in global markets, natural disasters, and the conflict innorthern Mozambique.

Mozambique faces substantial development challenges, including limited structural transformation and widespread poverty,
which affected roughly 74.4 percent of thepopulation in 2019 [when measured by theUS$2.15 per day poverty line (2017 PPP)].
Most of the labor force is employed in lowproductivity agriculture and services sectors. The main drivers of growth are capitalintensive megaprojects, with limited
spillovers to the rest of the economy.
Fiscal space is significantly constrained.
With over 90 percent of tax revenues in
2021-22 absorbed by the wage bill anddebt-service costs, the country allocates
only limited resources to public investment and social spending. Additional constraints to financing Mozambique’s large
development needs include lack of accessto international financial markets, highrisk of sovereign debt distress, a shallow
domestic financial market, and lending
rates that are among the highest in SubSaharan Africa. These challenges are compounded by fragility and conflict and highvulnerability to climate shocks.
Mozambique has the opportunity to implement reforms to broaden its economic baseand job creation sources, with a focus on sustainable growth. The private sector’s growth
could be fostered by improving access tocapital, and adequate infrastructure, and byaddressing regulatory challenges. Strengthening fiscal management and governanceand facilitating greater private sector participation in labor-intensive sectors such as
agriculture and services are crucial. Considering the fiscal constraints, it is criticalto enhance spending efficiency and debt
management practices to improve fiscal
discipline and establish credibility within
financial markets. The benefits from future LNG revenues can be maximized
through a robust fiscal framework, including the sound use of the recently established Sovereign Wealth Fund, to ensure effective resource management andpromote long-term economic resilience.

Recent developments
The economy grew by 5 percent in 2023,
primarily driven by the start of LNG production at the Coral South offshore facility.
Strong growth in agriculture and services,
particularly transport, also contributed tothe expansion of the economy, offsetting
the impact of lower manufacturing andconstruction activity. Inflation, which had
reached a five-year high of 9.8 percent in
2022, moderated to 7.1 percent in 2023.
This moderation supported a 3-percentage-point drop in poverty to 73.4 percent
in 2023. Despite the 100-basis-point cut inthe monetary policy rate to 16.3 percent inJanuary 2024, the overall monetary policy
stance remains tight, with high statutory
reserves (39 percent).
Fiscal pressures remain elevated, as measures to reduce the wage bill only had alimited impact in 2023. The primary deficit
improved from 2 percent of GDP in 2022 to

FIGURE 1 Mozambique / Real GDP growth and sectoral
contributions to real GDP growth

FIGURE 2 Mozambique / Actual and projected poverty
rates and real GDP per capita

Percent, percentage points
12Poverty rate (%)

1090

880

670

460

250040-230-420-6102014

2016

2018

Agriculture
Private services
GDPReal GDP per capita (constant LCU)

100

2020

2022

Extractives
Public Services

2024f

2026f

30000
25000
20000
15000
10000
5000

00
2008 2010 2012 2014 2016 2018 2020 2022 2024 2026

Manufacturing
Tax

Source: World Bank estimates.

International poverty rate

Lower middle-income pov. rate

Upper middle-income pov. rate

Real GDP pc

Source: World Bank. Notes: see Table 2.

MPO1Apr 24

an estimated 0.2 percent in 2023. Total expenditures in 2023Q3 surged by 14 percent
due to pressures from the wage bill, interest payments, and election-related spending. Total revenue growth was low at 6percent in the first three quarters of 2023
because of lower value-added tax (VAT)
collection after the VAT rate was cut to16 percent from 17 percent previously.
Public debt declined from 95 percent ofGDP in 2022 to an estimated 91 percent in 2023, even though domestic debt
stood at 27 percent of GDP in 2023, up
from 22 percent in 2020, indicating rising financing needs amid limited accessto international capital markets.
The current account deficit narrowed from
US$5.8 billion in the first three quarters of2022 to US$1.1 billion over the same period
in 2023 due to a combination of lower imports for megaprojects, lower fuel prices,
and an increase in LNG exports. The
deficit was primarily financed throughtrade credits and foreign direct investments in the extractive sector, which totaled US$1.5 billion by September 2023. As
a result, gross international reserves increased from US$2.8 billion in December
2022 to US$3.2 billion in November 2023,

covering four months of imports if
megaprojects imports are excluded.

OutlookGDP growth is projected to average 5 percent over 2024-26, supported by increasing
offshore LNG production, the resumptionof the Total-led LNG project, and dynamism in agriculture and services. The
stabilization of global commodity prices
could help contain inflation, enabling further easing of monetary policy. Growth isexpected to support a decline in the national poverty rate, from 73.4 percent in 2023
to 70.9 percent by 2026. However, the absolute number of Mozambicans living inpoverty is projected to increase by 1 million people during the same period, given
the fast population growth.
The fiscal balance is projected to decline
from 3.4 percent of GDP in 2023 to an average of 1.6 percent over 2024-26, partly
driven by higher revenues linked to LNG
revenue. Expenditure is projected to decrease from 31.3 percent of GDP in 2023
to 26.5 percent in 2026 due to consolidation

TABLE 2 Mozambique / Macro poverty outlook indicators

measures to reduce the wage bill. These include limiting hiring in non-priority sectors, reducing the 13th-month salarybonus, and auditing the public sector
workforce. Public debt is projected to stabilize at about 92 percent of GDP in themedium term, but Mozambique is expected to remain at high risk of debt distress inthe short term.
The current account deficit is projected
to widen sharply, averaging 44.1 percentof GDP over 2024-26, mainly driven by
LNG-related imports. Financing is projected to come from trade credits and foreign direct investment. Gross reserves areexpected to remain at adequate levels of
about US$3.5 billion, which is equivalent
to nearly four months of imports whenexcluding megaprojects.
The outlook is subject to substantial
downside risks from extreme climate
events, waning commitment to fiscal reforms in the run-up to elections, and uncertainty around the security situation in
the north. On the fiscal side, the highpublic sector wage bill and increasing
debt service will continue to limit the fiscal
space, increasing the risks of refinancing
and debt rollover.

(annual percent change unless indicated otherwise)

Real GDP growth, at constant market prices
Private consumption
Government consumption
Gross fixed capital investment
Exports, goods and services
Imports, goods and services

2021
2.3
17.3
-7.8
32.5
23.8
37.2

2022
4.2
3.0
17.2
-6.4
10.2
1.9

2023e
5.0
3.1
-25.4
10.1
19.5
3.3

2024f
5.0
9.8
-3.5
4.9
3.0
6.0

2025f
5.0
7.5
-8.1
8.4
2.0
5.0

2026f
4.4
6.1
-8.1
8.6
2.0
5.0

Real GDP growth, at constant factor prices
Agriculture
Industry
Services

2.2
3.7
1.6
1.6

4.2
4.4
3.8
4.3

5.0
6.0
7.6
3.4

5.0
4.0
8.2
4.2

5.0
4.0
8.1
4.2

4.4
4.0
8.1
3.0

Inflation (consumer price index)
Current account balance (% of GDP)Net foreign direct investment inflow (% of GDP)
Fiscal balance (% of GDP)
Revenues (% of GDP)
Debt (% of GDP)aPrimary balance (% of GDP)ab,cInternational poverty rate ($2.15 in 2017 PPP)b,cLower middle-income poverty rate ($3.65 in 2017 PPP)b,cUpper middle-income poverty rate ($6.85 in 2017 PPP)
GHG emissions growth (mtCO2e)
Energy related GHG emissions (% of total)

6.4

10.3

7.1

5.7

5.6

5.3

-22.3
31.6

-32.9
10.3

-16.0
4.4

-38.4
13.6

-42.0
14.5

-44.1
12.7

-4.6
27.4
105.0
-1.9

-4.9
27.4
95.2
-2.0

-3.4
27.9
91.9
-0.2

-2.3
26.4
94.4
0.6

-1.6
25.8
92.0
1.1

-0.8
25.7
81.6
1.5

76.1
89.3
96.5

75.6
89.1
96.4

73.3
88.1
95.9

72.5
87.7
95.7

71.6
87.3
95.6

70.9
87.0
95.4

0.8
8.1

0.7
8.4

0.7
8.5

0.9
9.0

1.0
9.50.9
9.9

Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD.
Notes: e = estimate, f = forecast.
a/ Figure includes once-off capital gains revenues in 2017, estimated at 2.7 percent of GDP.
b/ Calculations based on 2019-IOF. Actual data: 2019. Nowcast: 2020-2023. Forecasts are from 2024 to 2026.
c/ Projection using neutral distribution (2019) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU.

MPO2Apr 24