Mozambique

Economic Overview

The Republic of Mozambique is an economy of immense potential and significant challenges, primarily driven by its vast natural resource wealth. As one of the world's largest holders of natural gas reserves, the country is on the cusp of a major economic transformation led by multi-billion dollar Liquefied Natural Gas (LNG) projects. However, this potential is tempered by the challenges of managing public debt, recovering from climate-related shocks, and addressing a serious security insurgency in its gas-rich north. The 2025-2026 outlook is cautiously optimistic, predicated on the successful ramp-up of LNG production and continued progress in stabilization efforts.

GDP Size & Growth Trajectory

Mozambique's economy has been recovering from a severe debt crisis and the impacts of devastating cyclones. Real GDP growth was estimated at 5.0% in 2023, driven by a rebound in agriculture and the start of production from the Coral Sul Floating LNG (FLNG) project.

Growth is projected to accelerate significantly as LNG production expands. The IMF forecasts growth to reach 5.5% in 2025 and potentially higher in subsequent years, contingent on the security situation allowing for the resumption of larger onshore LNG projects.

Sector Composition

• Services: This is the largest sector, contributing around 45% of GDP. It is led by transport and logistics, trade, and communications.
• Agriculture: This sector remains the backbone of employment, providing livelihoods for over 70% of the population, while contributing about 24% to GDP. Key products include cashews, cotton, sugar, and various food crops.
• Industry: The industrial sector, accounting for about 25% of GDP, is dominated by mining and will be increasingly dominated by natural gas. Mozambique is a major producer and exporter of coking and thermal coal. The manufacturing sector is smaller, focused on food and beverage processing.

Inflation Trends

Inflation has been volatile, influenced by global commodity prices and domestic shocks. The Bank of Mozambique has maintained a tight monetary policy to combat inflationary pressures. As global prices have moderated and the domestic food supply has improved, inflation is expected to ease into the single digits in 2025-2026.

Fiscal & Monetary Policy Stance

• Monetary Policy: The Bank of Mozambique has been hawkish, maintaining high interest rates to fight inflation and support the currency, the Metical (MZN).
• Fiscal Policy: The government is focused on fiscal consolidation and improving debt management, working closely with the IMF under a support program. A key priority is ensuring that future revenues from the LNG sector are managed transparently and effectively to support sustainable development.

Debt Sustainability Indicators

Mozambique's public debt is high, a legacy of a hidden debt crisis that came to light in 2016. While the country has undergone debt restructuring, it remains at high risk of debt distress. Managing the debt portfolio and ensuring that new financing is directed towards productive investments are critical priorities.

Table 1: Key Macroeconomic Indicators (2023-2026F)

Market Size & Demand Potential

Mozambique's market is characterized by a large, young, and rapidly growing population, presenting a long-term consumer demand story.

Population Size and Demographics

With a population of nearly 35 million, Mozambique has a substantial domestic market. The population is extremely young, with a median age under 18, which will fuel the labor force for decades to come.

Urbanization and Consumer Hubs

The country is urbanizing, with key economic activity centered in the capital city, Maputo, and the central port city of Beira. The development of the gas industry is also leading to the growth of towns in the north, such as Pemba.

Consumer Spending & Market Access

Consumer spending is concentrated on basic necessities. The formal retail sector is limited, primarily located in Maputo. However, the high mobile penetration rate is creating opportunities for digital payment systems and e-commerce to expand market access.

Business Environment

The government is actively working to improve the business climate and attract investment, particularly into its priority sectors of energy and agriculture.

Ease of Doing Business & Regulatory Reforms

The government has launched a package of economic acceleration measures (PAE) aimed at improving the business environment, streamlining bureaucracy, and promoting private sector growth. The Agency for the Promotion of Investment and Exports (APIEX) is the primary body for facilitating investment.

Company Registration Process

The process of starting a business involves registering the company name, depositing initial capital, and registering with the tax and social security authorities. While reforms are underway, the process can still be bureaucratic and often requires local expertise.

Tax Regime

• Corporate Income Tax (CIT): The standard rate is 32%.
• Value Added Tax (VAT): The standard VAT rate is 16%.

Specific, more favorable tax regimes apply to the mining and petroleum sectors, which are governed by separate legislation.

Political Stability & Governance

Mozambique has maintained peace since the end of its civil war in 1992, but it faces a significant security challenge from an insurgency in its northern province of Cabo Delgado.

Political Environment

The country is a presidential republic. The FRELIMO party has been in power since independence. While the political environment in the south and central regions is stable, the ongoing insurgency in Cabo Delgado, the heart of the gas industry, poses a major risk. The government, with support from regional and international partners, is actively working to contain the insurgency and restore security to the region.

Rule of Law & Investor Protection

The legal system is based on Portuguese civil law. While the government has put in place legal frameworks to protect investment, enforcement can be weak and the judicial system is often slow. Corruption is a significant concern.

Infrastructure Readiness

Mozambique's strategic coastline and natural harbors make it a crucial logistics gateway for its landlocked neighbors like Zimbabwe, Zambia, and Malawi.

Transport: The Corridor Strategy

• Ports: Mozambique has three major deep-water ports that serve as the termini for regional transport corridors:
  • Maputo Port: Serves South Africa and Eswatini.
  • Beira Port: Serves Zimbabwe and Zambia.
  • Nacala Port: Serves Malawi and is one of the deepest natural ports on the east coast of Africa.
• Rail Network: The port corridors are supported by rail lines connecting them to the hinterland, which are vital for transporting bulk commodities like coal.

Energy Sector: The LNG Revolution

This is the most critical component of Mozambique's economic future.

• Natural Gas Reserves: The country has discovered over 100 trillion cubic feet of natural gas reserves offshore in the Rovuma Basin.
• LNG Projects:
  • Coral Sul FLNG (ENI): This floating LNG project is already in production.
  • TotalEnergies LNG Project: This is a much larger onshore project that was declared force majeure and put on hold due to the insurgency but is expected to resume as the security situation improves.
  • Rovuma LNG (ExxonMobil/ENI): Another major onshore project awaiting a final investment decision.
• Coal: Mozambique is also a major exporter of high-quality coking coal.

Sector-Specific Opportunities

1. Liquefied Natural Gas (LNG) and Support Services

The LNG sector is the single largest investment opportunity. Beyond the mega-projects themselves, there are vast opportunities for service companies in engineering, logistics, construction, security, and maintenance to support the industry.

2. Mining (Coal and Graphite)

Mozambique's coal sector is well-established, and the country also has some of the world's largest high-quality graphite reserves, a critical mineral for the battery industry.

3. Agriculture

With vast tracts of arable land and abundant water resources, there is immense potential to move from subsistence to large-scale commercial agriculture. Key opportunities exist in producing sugar, cotton, cashews, and food crops for both the domestic and export markets.

4. Logistics and Transport

Leveraging its strategic ports and rail corridors, there are significant opportunities in developing logistics services, including warehousing, freight forwarding, and port services, to serve both the domestic economy and landlocked neighbors.

5. Tourism

Mozambique has a stunning coastline, pristine islands (like the Bazaruto and Quirimbas Archipelagos), and unique national parks. The tourism sector has significant potential for recovery and growth, particularly in the beach and marine tourism segments.