Mozambique Economic Update: Why Services Matter for Growth and Jobs

Maputo, MOZAMBIQUE, 13 March 2023-/African Media Agency(AMA)/Mozambique’s economic recovery is picking up steam, with growth reaching 4.1% in 2022, despite global economic headwinds marked by rising fuel and food prices.

The medium-term economic outlook is positive, with growth expected to accelerate to 6% over 2023-2025, driven by continued recovery in services, increased liquefied natural gas production, and high commodity prices. However, downside risks linked to climate shocks, security risks, and food and fuel price pressures could lower medium-term GDP growth to 4.5%.

The 9^th edition of the World Bank’s Mozambique Economic Update (MEU) highlights the role of services in accelerating economic growth and job creation. The report calls for a shift from reliance on low-productivity agriculture and extractives to a development model based on diversified sources of growth, productivity, and jobs. It further outlines reform options to strengthen the role of the services sector as a backbone of the economy.

“Looking ahead, sustained, broad-based and inclusive growth will require raising productivity in services and stimulating the formalization of informal firms while strengthening linkages between sectors,” said Idah Pswarayi–Riddihough, World Bank Country Director for Mozambique, Madagascar, Mauritius, Comoros, and Seychelles. “Services could be an avenue toward inclusive growth and accelerated job creation,” she added.

Mozambique’s strong growth performance in recent decades has helped reduce poverty. However, growth has not been inclusive enough. This is partly due to heavy reliance on the extractive industry, with limited linkages to the broader economy, and low productivity in the agricultural sector—the primary source of livelihood for the poor.

“With over half a million people expected to enter the labor force each year, creating more and better jobs is an urgent challenge for Mozambique,” said Fiseha Haile, World Bank Senior Economist for Mozambique.

The Government of Mozambique is taking important steps to support economic recovery by stimulating private sector growth, including approving a package of economic acceleration measures in August 2022. The plan comes at an opportune moment, as the economy is recovering from a protracted slowdown following consecutive shocks, including hidden debts, cyclones, insurgency, and the COVID-19 pandemic.

The economic update points to the need for reforms that can strengthen the role of the private sector and promote access to finance by lowering the cost of bank credit, as well as offering credit guarantees to small enterprises. It also further recognizes the need to upgrade services into more sophisticated activities—such as ICT, finance, and professional and business services–for the sector to become an engine of inclusive growth and employment creation. 

Distributed by African Media Agency (AMA) on behalf of The World Bank

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