The latest Economist Intelligence Unit (EIU) report on Mozambique reported that attempts by the ruling party, FRELIMO, and the opposition RENAMO party, to reach a consensus over the riots of last November will continue to dominate the political agenda.

The leaders of both parties have met to discuss the working groups which are to investigate reforms in some areas demanded by RENAMO. Setting up the working groups is expected to be a drawn out affair and will not be helped by the complicated and contentious nature of some of the topics to be covered - legal and constitutional reforms, the bias of both state institutions and the media towards the ruling party - and the limited technical capacity of RENAMO to participate in them.

The economic outlook in Mozambique remains favourable. After lower than expected real GDP expansion of 3.8 percent in 2000 due to flooding, growth is expected to rebound in 2001 to 7.5 percent - closer to the level of economic growth achieved prior to the floods. Growth will be driven by recovery in a range of sectors including transport, agriculture, financial services and manufacturing. The EIU forecasts real GDP growth of 7 percent in 2002.

The inflation rate is forecast to fall to single figures in 2001, as supply after the 2000 flooding returns to normal. This follows unusually strong inflation of 11 percent in 2000, the highest rate since 1996, due to the disruption wrought by the flooding. The stabilisation of supply factors, lower international oil prices and a weakening US dollar will all contribute to lower (imported) inflation which is forecast to fall to 7 percent in 2001 and to 5 percent in 2002. For further details: www.eiu.com