World Bank: Mozambique’s economy set to rebound by 2022
INTERNATIONAL - MOZAMBIQUE’S economy is expected to recover from 2021, but substantial downside risks remain due to uncertainty surrounding the Covid-19 pandemic, according to the World Bank.
In its Mozambique Economic Update report, the World Bank said the economy registered its first contraction in nearly three decades in 2020.
However, growth is expected to rebound over the medium-term, reaching about 4 percent by 2022.
In a statement issued on Thursday, an update noted the Covid-19 pandemic hit Mozambique’s economy while the country was recovering from the debt crisis and the tropical cyclones of 2019.
The country’s real gross domestic product (GDP) was estimated to have declined by 1.3 percent in 2020, compared with a pre-Covid-19 estimate of 4.3 percent. Aggregate demand fell and lockdown measures necessary to contain the virus disrupted its supply chains.
Nevertheless, the report noted, job losses and business closure, while significant, were comparatively lower than in peer countries.
“Despite concerted efforts to contain its spread and mitigate its effects, Covid-19 continues to adversely affect households and businesses, delaying the country’s progress towards the Sustainable Development Goals (SDGs),” said Idah Z. Pswarayi-Riddihough, World Bank country director for Mozambique, Madagascar, Mauritius, Seychelles and Comoros.
“The urban poor, who are largely engaged in the informal sector, are among the hardest hit. While the impact is significant across the board, small firms are worst affected, notably those in the northern region.”
The report acknowledged the government took swift sanitary measures, deemed largely successful in keeping cases and deaths on the lower side during the first wave of the virus. Authorities also implemented robust fiscal and monetary policies aimed at protecting businesses and the most vulnerable.
Among these, the Bank of Mozambique imposed stimulus measures, including cutting the monetary policy rate and adopting policies aimed at ensuring financial sector stability.
Other crucial support included discounted credit lines to relieve firms of financial distress. Steps were also taken by commercial banks to restructure existing loans by extending maturities and offering grace periods on loan principals.
Several other fiscal measures were taken to support small firms and businesses. The report called for strengthening of these measures to address the effects of the second wave of the virus and support a resilient economic recovery.
“Indeed, continued support to households and viable businesses remains essential for resilient recovery,” said World Bank senior economist and the report’s leading author Fiseha Haile.
Haile added it would be key to continue supporting the poorest and most vulnerable through social protection programmes in the short term.
“More support to firms, conditioned on the protection of jobs, could help minimise lay-offs and the loss of productive capacity,” he said.
The report concluded by underlining the need to press ahead with the structural reform agenda as the pandemic subsides.
In the recovery phase, policies focusing on supporting economic transformation and job creation, especially for the youth, would be critical.
Targeted interventions to support women and alleviate gender inequalities as well as to harness the power of mobile technology would support sustainable and inclusive growth in the medium term.
African News Agency