The economic context of Mozambique

Economic Indicators

Mozambique saw robust economic growth before 2016, averaging over 7% annually from 2000 to 2015. However, between 2016 and 2021, several shocks—such as the hidden debt crisis, cyclones, COVID-19, and conflict in the north—severely affected economic activity and reversed poverty reduction efforts. The economy continues to rely heavily on natural resources, with extractive industries driving growth. According to the IMF, overall growth in 2024 was 1.9%, from 5.4% one year earlier, due to a weaker contribution of the extractives sector and a slowdown in Q4 amid widespread social unrest triggered by the results of October's elections. Growth is projected to recover to 3.0% in 2025 as social conditions stabilize and economic activity, particularly in services, gains momentum. However, elevated uncertainty, tighter fiscal policies, and foreign exchange shortages pose risks to the forecast (IMF).

Fitch estimates that the general government deficit widened to 6.5% of GDP in 2024. Disruptions to economic activity following the elections led to a revenue shortfall, estimated by the government at 3% of GDP, prompting some spending reductions. The change in government has delayed the 2025 budget production. Addressing the large public sector wage bill amid social unrest remains a significant challenge for the new administration. A more stable domestic environment is expected to support some revenue recovery in 2025 while financing constraints on spending are projected to reduce the deficit to 4.4%. Given higher deficits, Fitch now anticipates a slower reduction in general government debt/GDP compared to previous projections. The debt is still expected to decrease to 93.8% of GDP in 2024 (compared to a peer median of 68.2%), mainly due to an out-of-court settlement of liabilities from the "hidden-debt scandal." Debt/GDP at the end of 2026 is now forecasted at 93.4%. Inflation pressures have increased but remain manageable. The outlook faces significant downside risks, including extreme climate events, a slower pace or reversal of fiscal reforms due to the upcoming presidential elections, and a potential deterioration of the security situation in the north. A worsening fiscal stance could raise the risk of debt refinancing and the rollover of domestic debt. The Bank of Mozambique began a loosening cycle in January 2024, cutting the policy rate by 500bps to 12.25%. In late January 2025, it also reduced reserve requirements on local currency deposits from 39% to 29%. Despite supply chain disruptions and rising food prices due to social unrest, inflation stayed below the 5% target (IMF).

The unemployment rate was estimated at 3.8% in 2023 according to the World Bank (modelled ILO estimate). Frequent natural disasters hinder economic activity and food security, worsening poverty, which was projected at 74.7% in 2023 based on the USD 2.15 poverty line. High underemployment and inequality pose major challenges to economic inclusion, while the informal sector, which includes over 80% of the labour force, dominates the job market, leaving many workers without social protection (World Bank). The IMF estimated the country’s GDP per capita (PPP) to be only USD 1,729 in 2024.

Main Sectors of Industry

Mozambique is rich in natural resources and produces a large variety of agricultural products. It has significant coal and gas reserves and hydroelectric potential and possesses the world’s largest reserves of tantalite. It is among the largest producers of cassava and oilseeds (FAO). Although agriculture employs 69.5% of the country's active population, it represents 25.9% of GDP (World Bank, latest data available). The majority of agriculture in Mozambique is subsistence-based, with farmers growing food primarily for their own consumption, and the country continues to be a net food importer. Moreover, the sector is particularly vulnerable to natural disasters such as droughts and floods. The main crops in the country are corn, cassava, beans, rice, and a variety of vegetables and oilseeds. Agricultural production in Mozambique grew at an average annual rate of 1.5% between 2018 and 2022. However, the sector faces challenges such as low productivity and competitiveness, limited access to advanced technologies, inadequate rural infrastructure, and low value addition.

Mozambique’s natural resources include recently discovered gas and coal, high-quality iron ore, gold, bauxite, graphite, marble, and the rare mineral tantalite. The mining sector holds substantial potential for revenue generation and foreign investment. The manufacturing sector is still weak (7% of GDP) and is dominated by the production of the Mozal aluminium smelter. Overall, the industrial sector contributes to 21.3% of the country's GDP and employs 9.1% of the active population. Mozambican industrial production declined slightly in the first nine months of 2024 compared to the same period in 2023, reaching EUR 1.702 million, according to government data. The basic metallurgical industry remained the largest contributor, accounting for 31.8% of total production, but saw a year-on-year decline of 4.1% to EUR 541 million. The food industry followed, representing 28.9% of total output, with production rising by 6.8% from January to September to EUR 491 million.

The service sector represents 40.8% of GDP and accounts for more than one-fifth of total employment (21.5%). Tourism is the main industry, although it is still performing well below its potential. In addition to expanding financial services, the tertiary sector has a growing number of micro-scale retail businesses. The banking sector is primarily controlled by foreign-owned financial institutions, with 19 commercial banks among a total of 40 financial institutions. The major players include Millennium BIM (with Portuguese and Mozambican shareholders), BCI (with Portuguese and Mozambican shareholders), and Standard Bank (with South African shareholders). Together, these three banks account for over 70% of all financial assets, including deposits and loans (data from the U.S. Trade Administration).

 

Breakdown of Economic Activity By Sector	Agriculture	Industry	Services
Employment By Sector (in % of Total Employment)	69.5	9.1	21.5
Value Added (in % of GDP)	25.9	21.3	40.8
Value Added (Annual % Change)	3.8	13.8	3.1

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

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Indicator of Economic Freedom

Definition

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:

51,6/100

World Rank:

153

Regional Rank:

36

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

 

Sources of General Economic Information

Ministries

Ministry of Agriculture and Rural Development
Ministry of Mineral Resources and Energy
Ministry of Finance

Statistical Office

National Institute of Statistics

Central Bank

Central Bank

Stock Exchange

Stock Exchange of Mozambique

Economic Portals

Institute of Social and Economic Studies (IESE - Instituto de Estudos Sociais e Económicos)