Standard Bank’s Mozambique research office warned this week that the country may face a period of low economic growth and high inflation, making the government’s economic policy choices difficult.
“Rising inflation, when employment is cyclically low due to the weak economy, poses a challenge for policy makers because policies to fight inflation may slow economic growth but increase unemployment,” reads an analysis on the Mozambican economy.
In the report, the economic research office of Standard Bank notes that “there should be a recovery in the second half, but it is quite possible that Mozambique faces the specter of ‘stagflation’,” which is characterized by low or even zero economic growth accompanied by a sharp rise in prices.
Inflation in Maputo, Beira and Nampula accelerated year-on-year to 5.1 percent in February, compared to 4.1 percent in January, “exceeding the forecast of 4.5 percent and raising the specter of stagflation,” reads the text, which points out that the rise in prices was mainly driven by higher food prices, which rose 11.5 percent, and by energy costs, which rose 11.7 percent.
For the country as a whole, growth was 1.34% in February, which represents a slight acceleration from the 1.18% rise recorded in the previous month.
One has to go back to December 2017 to find a higher year-on-year inflation figure (change in consumer prices compared to the same month a year earlier), which at the time was 5.65%, according to INE tables. In the analysis of some macroeconomic and public finance indicators, Standard Bank also points out that “last year the growth in the amount of domestic public debt was 27.2% compared to 2019, which represents 20.2% of GDP, excluding the debt of public companies, may increase concerns about debt sustainability.”
