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The economy rallies, but not for everyone

Current economic growth is driven by gas and mining projects which have relatively weak linkages to most Mozambicans’ living standards

Today’s front pages in Maputo. Photo credit: Faizal Chauque / Zitamar News

Good afternoon. Although Mozambique’s political development seems to be going in the wrong direction, the economy seems to be improving. According to the government, the economy is growing at a strong rate, inflation is down, and state revenues are up (see below).

The latest from Zitamar News:

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From the Zitamar Live Blog:

Zitamar Mozambique Live Blog
🗳 The Supreme Court of Mozambique yesterday called and then swiftly cancelled a press conference about the rulings made by the district courts on the results of the local elections held last month. The Supreme Court is the highest court of appeal in Mozambique, but the power to make the final deci…
Zitamar Mozambique Live Blog
🗳 Seventeen people arrested during Friday’s protests against the confirmation of this month’s local election results were released yesterday. Adriano Nuvunga, director of the Mozambican Centre for Democracy and Development, reported on Facebook that the charges were dropped due to lack of evidence…

The first of these measures deserves celebrating the least. Mozambique’s economy is heavily dependent on extractive industries — gas and mining — and an increase in production can significantly influence GDP figures. That seems to be what has happened here with the 4.4% year-on-year rise in GDP growth for the first nine months of this year.  The Coral South floating gas platform began producing gas in November 2022, so the rise reflects that new production, as well as an uptick in coal mining. High commodity prices are also likely to play a part. In fact, according to the International Monetary Fund and as reported below, the manufacturing and construction sectors have actually been shrinking for over a year now. The World Bank’s latest economic update for Mozambique published in March predicted that over a third of GDP growth this year would be driven by extractives.

But neither gas nor coal nor any other natural resources production makes much difference to the wealth of ordinary Mozambicans. As discussed yesterday, the extractives sector still does not contribute enough to state revenues, and the profits generated overwhelmingly go overseas, including through the use of tax havens. The World Bank noted in its economic update that economic growth fuelled by extractives in recent years has tended to mainly benefit those on the highest incomes, with inequality rising between 2002 and 2015.

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