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Mozambique Economic Update : Mind the Rural Investment Gap (English)

As 2019 drew to a close, a year when Mozambique faced devastation caused by two severe cyclones, the country looks ahead having made significant progress in terms of economic stability, having strengthened its external buffers and having improved its fiscal position. The metical has been broadly stable since mid-2017, contributing to reduced inflationary pressures and providing room for an appropriately cautious monetary policy easing cycle. Growing investment flows, mostly linked to the extractive industries, have bolstered international reserves. Additional progress has been made in fiscal management with a notable reduction in the primary deficit between 2015 and 2018 and significant efforts to protect priority spending. Plus, with the progress to date in advancing its LNG interests, there is much to anticipate from the coming years. So, in this context and as the government enters a new term, where should the focus of policy makers be? The challenge remains to be growth. Growth was set further back in 2019 as Cyclones Idai and Kenneth and slower coal production affected output and is expected to fall to around 2.3 percent in 2019, down from 3.3 percent in 2018. With a population growth rate of 2.8 percent, this translates into a decline in the standard of living. Poverty has been further aggravated by the cyclones, which are likely to have impacted both the urban and rural poor in the affected areas. Growth is expected to accelerate with developments in the LNG sector and progress in post-cyclone reconstruction. But much of this expected growth is generated from the demand side of the economy, namely extractives-led investment and growing consumer demand, and less so from the supply side such as manufacturing, backbone services or non-extractive export growth. So, having put muchof the past economic volatility behind, structural reforms for more sustainable and inclusive growth must return to the center of the agenda, with the objective of recovering from the recent cyclones in the short-term and, in the medium term, of using the LNG opportunity to produce, export and employ.


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    Mahdi,Shireen, Massingue,Anna Carlotta Allen, Massarongo Chivulele,Fernanda Ailina Pedro, Tchamo,Brigida Alcidia Salvador, Casal,Julian, Baez Ramirez,Javier Eduardo

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    Mozambique Economic Update : Mind the Rural Investment Gap

  • Keywords

    basic infrastructure; rural area; Micro, Small and Medium Enterprise; southern african development community; capital gain; access to basic service; changing nature of work; low levels of access; access to public good; present value of debt; income from government security; impact of policy change; access to financial service; state-owned enterprise; Public Investment Management System; real effective exchange rate; consumer price index; short period of time; rate of population growth; risk-sharing facility; total number of people; urban poverty reduction program; current account deficit; public investment program; rural investment; disparities in access; investment budget; million people; fixed effect model; per capita investment; quality of infrastructure; access to finance; gap in access; debt sustainability analysis; foreign direct investment; number of jobs; demand for credit; demand for service; misallocation of investment; improvements in access; real exchange appreciation; financial inclusion; Mobile Wallet; estimate of expenditure; standard of living; financial safety net; household survey data; local economic activity; foreign currency reserve; ports and logistics; cause for concern; private external debt; trade and investment; access to school; high population density; public finance information; disaster risk management; Access to Electricity; access to health; debt service obligation; inequality of opportunity; children and youth; improved water source; banking sector liquidity; global competitiveness index; Boosting Growth; urban food prices; financing need; commodity price movements; local public administration; money market rate; per capita allocation; nominal exchange rate; capital expenditure budget; sovereign credit rating; fiscal consolidation effort; Fiscal Risk Management; public debt stock; volume of investment; access to account; fuel transport; primary school enrollment; rapid agricultural growth; population growth rate; commercial interest rate; domestic debt stock; real exchange rate; education and health; distance to school; return on asset; sale of asset; public capital spending; high inflation rate; retail payment system; multidimensional poverty index; access to sanitation; international development partner; budget execution report; investments in infrastructure; civil service salary; annual recurrent budget; credit information system; Population and Poverty; form of saving; rehabilitation of road; national action plan; public investment portfolio; municipal service delivery; central government transfer; natural resource revenue; external debt ratios; supply of skill; coal production; monetary policy; credit growth; fiscal adjustment; investment boom; budget allocation; investment level; recent years; access gap; capital budget; export growth; fiscal space; rural connectivity; Job Creation; external position; urban investment; business environment; health facility; investment spending; allocation formula; fiscal management; investment expenditure; investment scenario; private service; economic investment; enterprise survey; global growth; economic sector; public expenditure; Wage Bill; policy stance; commodity export; road investment; access indicators; primary deficit; urban poor; natural disaster; production target; reserve requirement; inflationary pressure; debt level; construction permit; total debt; coal price; household consumption; overall ranking; manufactured goods; rural parts; Exchange Rates; regional trends; fiscal policy; extractive sector; agricultural production; low rate; food production; average distance; Public Services; Fiscal policies; government contract; recovery effort; water connection; net enrollment; upper primary; electric light; agricultural output; production of gas; other sectors; weighted average; currency appreciation; banking service; rural economy; recent experiences; Rural Poor; prime rate; fiscal balance; high capital; regional disparity; fiscal outlook



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Mahdi,Shireen Massingue,Anna Carlotta Allen Massarongo Chivulele,Fernanda Ailina Pedro Tchamo,Brigida Alcidia Salvador Casal,Julian Baez Ramirez,Javier Eduardo

Mozambique Economic Update : Mind the Rural Investment Gap (English). Mozambique Economic Update Washington, D.C. : World Bank Group.