World Bank expects Mozambique's economy to gradually recover by 2021but says there remain substantial downside risks due to the uncertainty surrounding the path of the Covid-19 pandemic.

In its recent Mozambique Economic Update, the institution reports that the country faces several challenges, highlighting maintaining macroeconomic stability, considering exposure to commodity price fluctuations, and making further efforts to restore confidence through improved economic governance and greater transparency.

"Another major challenge is to diversify the economy away from the current focus on capital-intensive projects and low-productivity subsistence agriculture, while strengthening key drivers of inclusion, such as improving the quality of education and health service delivery, which in turn could improve social indicators," the institution reports.

In another development, the World Bank describes that Mozambique is grappling with an Islamist insurgency in parts of the gas-rich province of Cabo-Delgado. As a consequence, the organization says it is estimated that three million people will face high levels of food insecurity across the country due to the combined effects of conflict in the north, climate shocks, and Covid-19 mitigation measures that have restricted economic activity.

Even in the face of these challenges, and although the economy will grow into the negative in 2020, something not seen in the last three decades, the global financial institution expects the national economy to recover in the medium term, reaching about 4% of Gross Domestic Product (GDP) in 2022.

To make that projection a reality, the World Bank warns the country's leaders to move forward with their structural reform agenda as the pandemic subsides. In the short term, the institution points to measures to support viable businesses and households that would be crucial to a resilient and inclusive recovery.

"In the recovery phase, policies focused on supporting economic transformation and job creation, especially for youth, will be critically important. Targeted interventions to support women and alleviate gender inequalities, as well as to harness the power of mobile technology, can support sustainable and inclusive growth over the medium term," it concludes.