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Economic outlook for 2017, presented in Economic Briefing

The country continues to take firm steps to overcome a set of challenges to restore macroeconomic stability, but progress remains slow and risks remain high, said Standard Bank chief economist Fáusio Mussá during the Economic Briefing, on Tuesday, July 4th, in Maputo, aiming to present the economic outlook for 2017 and discussing the various potential investments in the country.

This scenario, as he explained, is due to the fact that a large part of economy recovery prospects and sustainability assumptions are focused on the LNG-Liquefied Natural Gas projects, which entails risks in the event of additional delays in the start-up of these megaprojects and May jeopardize the sustainability of the economic recovery.

 "Our analysis indicates that the country continues to take firm steps towards the recovery of the economy. But maintaining macroeconomic stability requires acceleration of structural reforms, particularly in the judiciary, business, banking and financial, tax and public sectors, "said Mussá, adding that" we have noticed that GDP is growing, however, this growth is still not necessarily reflecting a broad resumption of activity. It partly reflects a better performance in the primary sector where agriculture benefits from an improvement in the climatic conditions and the stability environment created by the ceasefire in place since the end of 2016. "

According to the economist, he also reflects "the growth of the export sector, particularly the mining, including some companies that have managed to maintain a considerable level of business, investing equity, since monetary policy remains restrictive what Implies interest rates for credit to the economy at around 30 percent."

"With a cumulative appreciation of the Metical of 15.1 percent in the first six months of 2017, some stability of the Metical exchange rate against the Dollar in the second half around the current levels of 60.5 Meticais per Dollar is expected, which represents a substantial improvement over the end of 2016 71 US/metical. Although there is still potential for further appreciation of Metical, we note that the Central Bank has been intervening in the exchange market to limit Metical's gains against the Dollar and protect international reserves, which indicates that we can enter a period of relative stability at the current levels, "he stressed.

If the country's economy registers the expected level of progress for 2018, it may be difficult for the Central Bank to continue to intervene to maintain the metical above 60, against the dollar: "We can have the Metical around 50 At the end of 2018, which supports our belief that next year we will have inflation in a single digit, "he said.

On his view, these economic indicators, whether the acceleration of GDP growth, inflation reduction prospects or currency stability, indicate that the country had probably already gone through the worst in this crisis, but the risks remain high, especially those related to fiscal fragility and public companies.

For Chuma Nwokocha, managing director of Standard Bank, institution that has been promoting Economic Briefing for 12 years, this initiative aims to promote the debate on the country's macroeconomic policy and to share its perspectives in a transparent, open and independent manner.

"In this space, investors and managers of private and public companies, including regulators, who make decisions that impact the Mozambican economy, can jointly reflect on economic trends and look at what can be done to accelerate growth" , Said the managing director.
This year's Economic Briefing focused on "Mozambique - restoring macroeconomic stability", as the Bank considers it an indispensable condition for the country's progress.

In addition to the chief economist of Standard Bank, the economic conference was led by Goolam Ballim, chief economist of the Standard Bank Group, Osório Lucas, Executive Director of MPDC-Maputo Port Development Company, and Carolin Geginat, chief of World Bank’s program for Growth with Equity, Financing and Institutions, which spoke respectively on the "International Economic Perspectives", "Investment in Infrastructure" and "Perspectives for the Private Sector in Mozambique, including the need for structural reforms in the economy".

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