Fitch, imagem Reuters
London, 14 Aug (AIM) – The Fitch ratings agency, which is based in both New York and London, predicts strong economic growth in Mozambique with real GDP expected to reach 6.4 per cent this year and to average 4.9 per cent over 2024-2025. This is a significant increase from the 4.2 per cent seen last year.
In an analysis released on Friday, Fitch states that this growth primarily reflects “a Liquefied Natural Gas-led increase in the output of the extractive sector, as the production capacity from ENI’s Coral South floating LNG platform increases to 70 per cent and 90 per cent in 2023 and 2024, respectively“.
However, Fitch has kept its key Long-Term Foreign-Currency Issuer Default Rating (IDR) rating for the country at CCC+ due to what it calls a “substantial credit risk” reflecting “elevated government debt levels, persistent fiscal deficits, weak public financial management, low GDP per capita, weak governance indicators and a challenging security situation”.
Despite this, Fitch welcomes “the agreement of a three-year 456 million US dollar Extended Credit Facility with the International Monetary Fund in 2022, positive momentum in the development of the liquefied natural gas sector, and measures to address the fiscal slippage of 2022” which it notes “provide some support to creditworthiness”.
The ratings agency also stresses the positive effect on the economy on “the resumption of the construction of Total’s 20 billion US dollar LNG project, which we assume will begin in the first quarter of 2024, given the improvements in the security conditions in Cabo Delgado throughout 2023”.
According to Fitch’s analysis, the debt-to-GDP ratio will decline as a result of strong economic growth. In addition, it notes that the metical has been stable relative to the US dollar although it warns that “renewed external pressures could lead to significant depreciation of the exchange rate”.
Fitch expects Mozambique’s international reserves to increase from 2.7 billion US dollars in 2022 to 3 billion dollars this year and 3.5 billion dollars by the end of 2025. This will be driven by lower food and fuel import costs, a marginal contribution from LNG exports, and the resumption of Total’s Area 1 project of which 12.5 per cent of the total investment will have to be contracted domestically.
Fitch is one of the three main credit rating agencies (the others being Moody’s and Standard and Poor’s).
(AIM)
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