London — The African Development Bank expects the Mozambican economy to grow by 7.5 per cent this year and 7.9 per cent in 2013, compared with 7.2 per cent last year, according to its annual publication "The African Economic Outlook".

The report puts Mozambique in the top five African countries in terms of growth in 2011, as well as in terms of improvements in levels of human development (which is an aggregate of life expectancy, education and standards of living).

It stated that growth in Mozambique is expected to remain robust, but that the main short term challenge is reconciling ambitious infrastructure investment with social safety nets.

The study expects that strong foreign direct investment inflows, strong agricultural growth and infrastructure investment will lead to high real growth this year and in 2013.

It welcomed the Mozambican Central Bank's consistent tight monetary policy and the prudent fiscal policy, which has kept inflation to low levels.

However, it warned that "Mozambique's main medium term challenge is the broadening of its fiscal base as aid flows decrease. Poverty levels seem to be stagnant with 54.7 per cent of the population living below the national poverty line".

In terms of youth unemployment, the country has a high population growth rate and the report estimates that 300,000 people join the labour market every year. But the economic growth has largely been driven by capital intensive projects leaving unemployment at 27 per cent.

The study found that Africa´s economies grew last year by 3.4 per cent, but expects this to increase to 4.5 per cent this year and 4.8 per cent in 2013. Last year's low growth was put down to problems in north Africa, which saw a growth rate in that region of only 0.5 per cent.

For the future, "the economic outlook for Africa remains optimistic. Natural resource-rich economies are expected to do better than more mature emerging economies", the African Economic Outlook said.

In addition, growth is accelerating because of "migrant remittances and good economic policies maintained by some of the continent's countries, aided by good weather and relative stability in the international market".

However, it warned that 'the continued economic crisis in the euro area may reduce demand for African exports, while lowering external resource inflows'.

This year's report focuses on youth employment, and warns that the number of youths in Africa is set to double by 2045. It calls for countries across the continent to boost job creation and help young people acquire new skills.