Business robustness index improves slightly in Mozambique

This slight increase, which is bellow than expected, was supported by the opening of the agricultural marketing season, as well as increased port and logistics operations, due to the removal of a number of restrictions which had been imposed to prevent the spread of the Covid-19 pandemic.

The same trend is seen with Macroeconomic Framework Index, which also rose one percentage point, from 49% in the second quarter to 50% in the second quarter.

CTA explain that this is due to the dynamics of economic activity supported by agriculture and domestic trade of its production, coupled with exchange rate stability.

However, prices continued to increase in the 2nd quarter, with inflation rising from 6.13% to 6.82%, due to fuel and food’s prices increase in the domestic market.

The Employment Trends Index (ITE) also shows some improvement with an increase of 1.56 points, from 115.00 to 116.56. This shows that there were better chances of getting a job in the 2nd quarter as compared to 1st quarter.

Based on hiring cycles indicators, CTA concluded that ITE’s increase was supported by seasonal jobs, given the willingness-to-hire index which rose from 15.47% to 23.88%, between the 1st and 2nd Quarter, while the full-time employment rate remained unchanged at 25%.

These results are consistent with the BRI’s trend as much of its increase was supported by agriculture, domestic trade of the agricultural products, the latter not requiring permanent workers.

Overall, CTA's assessment concludes that business performance in the second quarter of the year improved compared to the first quarter, although below expectations.

For the 3rd quarter of 2022, CTA expects business performance to maintain the same trend. “This expectation is supported, among others, by (i) the Covid-19 easing of restrictions consolidation process, allowing the tertiary sector to consolidate its recovery; (ii) the peak phase of the domestic trade of the agricultural marketing season, as well as (iii) the recovery of the entertainment and tourism industry, as well as exports of liquefied natural gas”, reads the report.

“This dynamic, combined with the expected performance of macroeconomic indicators, open up a room for a conservative monetary policy, with no further interest rate increases expected for next quarter”, adds the report.

These expectations are favoured by the resumption of direct support to the Mozambican State Budget, which had been interrupted in April 2016, when the true size of Mozambique’s “hidden debts” became public knowledge.

According to CTA, this could expand the government's fiscal space to pursue investment expenditures and increase demand for goods and services, which will increase business opportunities for the private sector.

However, these forecasts are conditional to the security situation in the northern province of Cabo Delgado and externally by the Russia-Ukraine conflict, which could negatively affect fuel and cereal prices in the international markets.

(AIM)