Newly released market study: Mozambique Country Risk Report Q3 2016
New Country Reports research report from Business Monitor International is now available from Fast Market Research
[ClickPress, Mon Jul 04 2016] The Mozambican government's announcement that it will not honour a USD178mn interest repayment, due in late May, heralds several years of economic malaise over our medium-term outlook. The next five years will see minimal levels of investment into any projects requiring public sector support, increased borrowing costs, and escalating political risk. Beyond 2021, the outlook will improve significantly as we still expect projects in the gas sector to progress.
Political risk will escalate in Mozambique over the next two years, as a deterioration in the country's economy adds further fuel to RENAMO'scampaign to destabilise the status quo under the incumbent FRELIMO government. While we expect an increase in attacks over this period, the government's commitment to security spending and assurances of support from China mean the country will not return to the scale of violence seen during the 1977-1992 civil war.
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An ongoing debt scandal will force the government to restrain spending in 2016, with capital expenditures likely to be worst hit. However, the budget deficit will remain wide due to falling revenues, as several donors withhold funding in response to the government's failure to disclose the full details of the public debt.
The ongoing government debt scandal and ensuing deterioration in investor sentiment will see inflation remain high over 2016, as the metical continues to depreciate. Further inflationary pressures from food shortages and logistical obstructions will prompt the central bank to continue its hiking cycle into Q117.
A deterioration in investor sentiment towards Mozambique following the government's hidden debt crisis will increase the risk of a balance of payments crisis over the next five years. However, the government's limited role in the nascent LNG sector will see investment into this industry continue to provide much-needed foreign capital and fuel economic growth.
Mozambique is vulnerable to adverse weather specifically too much or too little rain and this will continue to pose a risk to the agriculturally-based economy.
The security situation poses a major threat to economic growth, the external accounts and government revenue as a significant deterioration would likely lead to reduced foreign investment inflows.
A failure to address deficient infrastructure is a pressing risk to the Mozambican economy. Transport infrastructure in particular is currently inadequate to get Mozambique's natural riches to international markets.
Assess your risk exposure in Mozambique with our 100% independent forecasts assessing the pace and stability of this key market. Backed by trusted data from BMI Research's 52 million data point economic forecast model, this report will allow you to measure political, economic, business environment and operational risks in Mozambique with confidence.
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