The post-election conflicts intensified the losses of Mozambican companies, leading them to record, in December 2024, the worst economic contraction since August 2020, according to Standard Bank's Purchasing Managers' Index (PMI).

"Mozambican private sector companies reported a further deterioration in their conditions in the last month of 2024, with production and order books once again negatively affected by protests and strikes. Customer demand fell at the highest rate in four and a half years, causing further reductions in purchases, stocks and staffing levels," reads the document published by the bank on Monday.

In December, the main PMI indicator dropped another two points, putting it well into contraction territory. It fell from 48.4 in November to 46.4. The indicator signaled a solid deterioration in the health of the private sector.

According to a document consulted by MZNews, the companies widely indicated that the decline in operating conditions was due to the protests and strikes that followed the general elections.

"This instability had a considerable impact on the total volume of new orders, which fell in all monitored sectors, registering the biggest drop since June 2020," we read.

Although product shortages and strikes resulted in capacity problems in some companies, these were vastly outweighed by the lack of demand. As a result, the backlog of orders at Mozambican companies fell in December (albeit slightly).

In view of the post-election protests that have altered the economic scenario, "we have lowered our GDP growth estimates for 2024 to 2.5% year-on-year and our growth forecasts for 2025 to 3% year-on-year. In 2023, GDP growth was 5.4% 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. Events linked to climate change could also have a negative impact on growth. Tropical cyclone Chido, which hit parts of northern Mozambique, has already caused deaths, displacement and damage to infrastructure," commented Flávio Mussá, the chief economist at Standard Bank Mozambique.

"However, we maintain our year-end inflation forecast for 2025 of 5.8% year-on-year. Nevertheless, inflation risks have increased due to higher food inflation as well as entrenched fiscal and exchange rate pressures."