Standard Bank has published a report revealing that the Gross Domestic Product (GDP) will slightly exceed $15.6 billion in 2021. The figure represents a growth of 2.2% compared to the previous year when the record was $15 billion.

The forecasts of what is considered one of the three best banks in Mozambique by KPMG indicate that this year the GDP growth may be set at 3.1%, equivalent to 1,125 billion meticais, on the long scale, according to a report quoted by the portal cartamz.

The same document states that, despite the negative effects of covid-19 and the strong growth of expenditures projected for 2022, this year the Government will continue its efforts towards fiscal consolidation.

"The FY 2022 budget forecasts revenue growth of 10.7%, to MZN 293.9bn, or 26.1% of GDP, with overheads excluding loan repayments at 24%, to MZN404.3bn, or 35.9% of GDP. The result is an 82.6% increase in the fiscal deficit before grants, to MZN110.3bn, or 9.8% of GDP, which reduces to MZN23.5bn, or 2.1% of GDP after grants," it reads.

In the bank's view fiscal consolidation should be fortified by external military support to help combat insecurity in Cabo Delgado, and may bring some material relief to national public finances and free up some resources for social and economic areas, which grows to 14.2% of GDP from 12.3% of GDP.

"Education spending remains stable at 6.2% of GDP, health sees a slight increase to 3.7% of GDP from 3.6% of GDP, with agriculture experiencing the largest increase to 4.2% of GDP from 2.6% of GDP," the report advances.

The bank says that the government's expectation of a possible increase in external support as the country moves towards an International Monetary Fund program is evident. However, the institution notes, that delays in external support may still result in spending cuts to avoid domestic debt pressures and to keep fiscal consolidation on track.

"With MAM and ProIndicus debts, which are estimated at 10% of GDP, not being serviced, and only the $900 million Eurobonds paying interest for now with principal repayments starting in 2028, debt service remains manageable. Gross domestic financing requirements are set at 4.7% of GDP, with amortization at 1.8% of GDP. External debt repayment is set at 2.3% of GDP, with external borrowing at 1% of GDP," Standard Bank's African Markets Revealed 2022 concluded.