世界发展银行-Mozambique-Economic-Update,-February-2021---Setting-the-Stage-for-Recovery_52页_540kb

Summary of Mozambique Economic Update (February 2021)

Core Content

The Mozambique Economic Update (February 2021) provides an analysis of the economic impact of the COVID-19 pandemic on the country, highlighting the challenges faced by businesses and households, and offering policy recommendations for recovery and long-term development.

Main Points

Economic Growth and Outlook

• First contraction in 28 years: Mozambique's economy is expected to contract by 0.8% in 2020, the first decline in nearly three decades, due to falling global demand, lower commodity prices, and delayed LNG investments.
• Recovery expected: The economy is projected to recover gradually, with growth expected to reach 2.8% in 2021, 4.4% in 2022, and 6.3% in 2023 under the baseline scenario.
• Downside risks: A potential -1.4% growth in 2020 and 1.4% in 2021 under the downside scenario, due to delayed vaccine roll-out, fiscal and monetary pressures, and ongoing instability in the north.

Impact of the Pandemic

• Severe impact on businesses: The pandemic led to significant revenue losses and job cuts, especially in small businesses, with 7% of GDP lost in 2020.
• Service sector hit hardest: The tourism and hospitality sectors experienced a 31% decline in output, and private services and manufacturing saw 3% and 5% drops, respectively.
• Household income loss: About 62,000 employment contracts were suspended, and 120,000 jobs were lost, with income per capita falling from $519 to $461 in 2020.
• Poverty increase: The poverty rate is projected to rise from 62.5% to 64.0%, pushing 850,000 more people into poverty.
• School closures: These have undermined human capital development, especially in urban areas where more than 50% of households reported running out of food.

Government Response

• Social expenditures: The government increased social spending and expanded support to most affected households.
• Monetary policy: The Bank of Mozambique implemented rate cuts, foreign currency credit lines, and measures to ensure financial stability.
• Fiscal measures: Fiscal support was limited due to overly restrictive eligibility criteria, and the financing gap from the pandemic response was significant.
• Sector-specific interventions: Some loans were restructured with extended maturities and grace periods, but support was insufficient to meet demand.

Policy Recommendations

• Short-term: Strengthen support for viable firms, provide employment subsidies, and expand access to finance for small businesses and women.
• Medium-term: Focus on rebuilding the health system, reigniting structural reforms, and targeting support for firms to preserve productive capacity.
• Long-term: Diversify the economy away from megaprojects, promote inclusive growth in services, small-scale manufacturing, and agribusiness, and enhance public investment in underserved areas.

Key Information

• Economic contraction: The economy contracted by 0.8% in 2020, the first contraction in nearly 30 years.
• Poverty increase: An estimated 850,000 people fell into poverty in 2020, according to the international poverty line.
• Sector performance:
  • Agriculture: Output increased by 3% in the third quarter of 2020.
  • Extractives: Coal production dropped by 40%, and the sector is expected to contract by 12% in 2020.
  • Services and manufacturing: Both sectors saw sharp declines due to lockdowns and reduced demand.
• Fiscal challenges: The fiscal deficit rose sharply due to lower revenues and higher expenditures, and debt sustainability is a major concern.
• Exchange rate: The current account deficit (CAD) widened in 2020 due to higher import levels and declining commodity exports.
• Vaccine roll-out: Effective vaccination is critical for economic recovery, and enabling conditions must be put in place to ensure smooth implementation.
• Social protection: Programs should be scaled up, especially for informal sector workers, to support livelihoods and reduce inequality.

Conclusion

The Mozambique Economic Update underscores the severe impact of the pandemic on the economy, businesses, and households, particularly the urban poor. It emphasizes the need for targeted support, fiscal consolidation, and economic diversification to ensure a resilient and inclusive recovery. The roll-out of a vaccine and effective social protection are highlighted as key to recovery, while long-term structural reforms are essential to sustain growth and achieve the Sustainable Development Goals (SDGs).