8 July 2008
Maputo — Mozambique's GDP growth rate is faltering, according to figures released by the Bank of Mozambique on Tuesday.
The economy grew in 2007 by seven per cent, but growth in the first quarter of this year, compared with the first quarter of 2007, was only 3.5 per cent, the Bank's spokesperson, Waldemar de Sousa, told a Maputo press conference.
Essentially, this was due to poor performance by manufacturing industry, which showed a nine per cent decline in production. The electricity and water sector also declined, by 10.4 per cent.
But the government can take heart from continued strong growth in other sectors during the first quarter - in transport and communication (16.4 per cent growth), mining (12.6 per cent) tourism (11.8 per cent), agriculture (8.3 per cent) and construction (8.1 per cent).
The balance of trade worsened over the quarter, with exports declining by 7.1 per cent, while imports rose by 19.5 per cent. This was caused largely by the bill for imported fuels, which rose from 61.7 million dollars in the first quarter of 2007 to 115.7 million dollars in January-March this year. Fuel accounted for 15.5 per cent of the total import bill.
There was also a 31.8 per cent rise in the cost of imported grain, from 40.7 million dollars in the first quarter of 2007 to 53.6 million this year.
Mozambique is importing fewer cars than it did last year. The cost of imported vehicles fell 5.7 per cent, from 46.9 to 44.2 million dollars.
Mozambican exports remain dominated by the aluminium ingots produced at the MOZAL smelter on the outskirts of Maputo. Aluminium exports in the first quarter were valued at 330.3 million dollars, which was 60.8 per cent of all exports. Nonetheless, this was a 13 per cent decline on the 379.5 million dollars earned by Mozambican aluminium in the first quarter of 2007.
The fall is due partly to a 1.7 per cent decline in the world market price of aluminium, and partly to a reduction in MOZAL's capacity, due to electricity shortages in South Africa. MOZAL is not on the Mozambican electricity grid, and derives its power from the South African electricity utility Eskom. Unable to supply all its customers, Eskom demanded that major industrial consumers, including MOZAL, reduce their consumption of electricity.
There was also a 19.2 per cent decline in the country's second most important export, electricity from the Cahora Bassa dam on the Zambezi. Exports from Cahora Bassa were worth 64.9 million dollars in the first quarter of 2007, but only 52.4 million this year. Eskom had to reduce its purchases of Cahora Bassa power because of essential maintenance work on the Apollo sub-station in South Africa. Exports to Zimbabwe were also cut, but Sousa did not know why. (Zimbabwe's failure to pay its bills on time certainly explains part of this - for the first ten days of the year Cahora Bassa disconnected Zimbabwe altogether, and only switched the power back on when the Zimbabwean power company, ZESA, paid 10 million dollars).
The January to June inflation rate, measured by the Maputo Consumer Price Index, was 3.8 per cent. Most of this (over 3.2 per cent) occurred in the first quarter. In April, inflation was only 0.45 per cent, and in May there was a very slight decline in prices (of 0.01 per cent). In June, inflation rose by 0.12 per cent. This pattern is fairly typical - almost every year, as the harvest comes in, prices drop and, since food dominates the consumer price index, inflation also drops.
Annual inflation rose from 10.3 per cent in December to 12.1 per cent in March. It fell to 10.1 per cent in May, and then rose slightly to 10.4 per cent in June. What these figures mean is that the government's target of an annual inflation rate of 5-6 per cent by December 2008 seems almost impossible to achieve.
The country's net international reserves rose from 1.5 billion dollars in December to 1.684 billion dollars in June (enough to cover six months worth of imports). This is almost exactly on target: the planned figure for reserves was 1.679 billion dollars by June 2008.
Sousa believed that the Mozambican financial sector was stable. Non-performing loans have fallen to a level where any repeat of the collapse of the two privatised banks (the BCM and Austral) in 2000 and 2001 seems quite unthinkable.
Bad loans accounted for 3.8 per cent of the entire credit portfolio in 2005, and this figure fell to 3.3 per cent in 2006 and 2.6 per cent in 2007.
Sousa stressed that the country's risk rating has improved. In the rating of both Standard and Poor's and Fitch, Mozambique's classification has risen from B to B plus. Under the World Bank's Country Policy and Institutional Assessment (CPIA), Mozambique improved marginally from 3.48 in 2005 to 3.53 in 2006 - which is rather better than the average of 3.33 for borrowers from the World Bank's soft loan facility, the International Development Association (IDA).
The CPIA ranks countries on 16 different factors, including macro-economic management, fiscal policy, regulatory environment, gender equity, property rights, quality of public administration and transparency (including corruption) in the public sector. In the CPIA, scores are from one to six, with one being highly unsatisfactory and six highly satisfactory. A score of four is "good" - so it can be concluded that Mozambique still has quite some distance to travel.
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