Abidjan, Côte d'Ivoire, May 27, 2025 (Lusa) - The African Development Bank (AfDB) has predicted a "recovery in the extractives sector" in Mozambique, which should boost economic growth to 2.7% in 2025 and 3.5% in 2026, according to an analysis of the country's situation.
"Inflation is expected to rise to 4.8% in 2025 and grow further to 5.2% in 2026, due to rising local food prices," the financial institution added in the chapter on Mozambique in its African Economic Outlook (AEO) report for 2025.
The forecasts for Mozambique follow a moderate GDP growth of 1.8% in 2024, due to "declining production in the extractive industries and agriculture," after growth of 5.4% in 2023, notes the AfDB, also recalling the decline in inflation: 7% in 2023 and 3.2% in 2024.
Now, the budget deficit "is expected to increase to 5.4% of GDP in 2025 and then decline to 4.5% in 2026 due to fiscal consolidation".
The AEO 2025 was published during the AfDB's annual meetings in Abidjan, Côte d'Ivoire, whose central theme is the mobilisation of the continent's resources, freeing it from external dependence.
In the case of Mozambique, the main risks to growth include "climate change, social unrest and its effects on economic activities, cuts in foreign aid and trade tensions" worldwide.
The AfDB considers it urgent to improve the efficiency of public spending, diversify export markets and foster dialogue between all political parties.
One of the indicators highlighted in the analysis concerns the low tax-to-GDP ratio, at around 23%, "below regional standards, signalling unfulfilled fiscal potential".
“Revenue mobilisation is limited by illicit financial flows, estimated at $1.3 billion (€1.15 billion) annually, and weak tax administration,” it added.
On the other hand, the state's "heavy wage bill" equals an average of 90% of tax revenue (2021-23), and increased debt service obligations significantly limit the margin for development spending.
"Getting off the Financial Action Task Force (FATF) grey list, combating illicit financial flows and implementing public-private partnership regulations will be essential tasks to improve the investment climate and increase economic resilience," the report concluded.
*** The Lusa news agency travelled at the invitation of the African Development Bank (AfDB) *** LFO/ADB // ADB.
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