Post-election crisis forced private sector layoffs

Maputo, 10 Jan (AIM) – Mozambique’s private sector companies claim that the post-election crisis, characterized by strikes, mass demonstrations, and looting since last December forced further reductions in purchases, stocks and staff since customer demand fell.

According to the monthly Purchasing Managers’ Index (PMI) survey by the South African Standard Bank, as a result of the instability, the PMI in the private sector fell to 46.4 points in December from 48.4 points in November, declining for the fourth month in a row and reaching the lowest level since August 2020.

“PMI records below the reference value of 50 suggest a consecutive monthly contraction in economic activity. The post-election protests that have been taking place since 21 October have been suppressing economic activity, with the December PMI reflecting consecutive monthly contractions in production, new orders, supplier delivery times and procurement stocks as a result of a reduction in aggregate demand and interruptions in supply chains”, said the Standard Bank chief economist in Mozambique, Fáusio Mussá, cited in the document.

According to Mussá, as a result of this unfavourable business environment, Standard Bank had lowered its estimates for growth of the Gross Domestic Product (GDP) for 2024 to 2.5 per cent year-on-year and its growth forecast for 2025 to three per cent year-on-year.

“In 2023, GDP growth was 5.4 per cent year-on-year. This implies that GDP growth will turn negative at least in the fourth quarter of 2024 and the first quarter of 2025”, he said.

However, Standard Bank maintains its year-end inflation forecasts for 2025 of 5.8 percent year-on-year, despite the fact that inflation risks have increased due to higher food prices, as well as entrenched fiscal and foreign exchange pressures.

“The outlook has worsened sharply due to post-election tension, receding GDP growth, rising inflation, fiscal pressures, imbalances between demand and supply of foreign currency, recurring episodes of insecurity in Cabo Delgado and, consequently, ongoing delays in investments in liquefied natural gas projects”, reads the survey.

The survey – which was compiled from responses to questionnaires sent to purchasing managers from a panel of around 400 private sector companies – also points out that climate change events also had a negative impact on growth, taking into account Tropical Cyclone Chido, which hit several districts in the northern provinces of Cabo Delgado and Nampula in December, causing the deaths of at least 94 people.

The survey covered sectors of agriculture, mining, manufacturing, construction, wholesale trade, retail trade and services.
(AIM)
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