Mozambique's economy has experienced a sharp slowdown since 2016, with two-thirds of the population below the poverty line. The country faces significant challenges in job creation, as structural transformation has favored extractive industries over manufacturing. Key points include:
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Growth Performance: After robust growth averaging nearly 8% annually from 2000 to 2015, Mozambique's economy slowed to an average of 2.9% annually from 2016 to 2024. Per capita GDP growth has stalled, and poverty now affects about two-thirds of the population. The slowdown reflects weaker contributions from capital accumulation and total factor productivity since 2016.
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Job Creation: Mozambique needs to create around 0.55 million new jobs annually by 2030 to employ new entrants to the workforce. The weak link between growth and employment is a major concern, as the country generates significantly fewer jobs per unit of per capita GDP growth compared to emerging markets outside Sub-Saharan Africa.
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Structural Transformation and Diversification: The economy has shifted toward extractive industries, with the primary sector's share declining and the secondary sector expanding due to mining growth. Manufacturing, a sector typically associated with high productivity and employment, has been contracting since the 2000s. This raises concerns about job creation and inclusive growth.
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Productivity in Agriculture: Agriculture remains a cornerstone of the economy but suffers from low productivity. Only about 12% of Mozambique's land area is currently under cultivation, and smallholders face significant constraints in accessing inputs, finance, and irrigation. These challenges keep productivity levels well below those of comparable countries.
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Informality: The informal sector dominates the economy, accounting for about one-third of GDP and employing about 95% of the workforce. While most informal jobs are low-paying and insecure, some offer training and relatively high productivity, serving as stepping stones toward formal employment.
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Physical Infrastructure and Human Capital: Human development indicators are among the world's lowest, with the country ranking 182nd out of 193 nations in the 2023 UNDP Human Development Index. Fiscal pressures have severely limited government spending on education, health, and social protection, constraining human capital accumulation.
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Credit to the Private Sector: Credit allocation has shifted toward government borrowing since 2016, crowding out private sector lending. Many firms report limited access to credit as a major constraint to their operations.
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Governance: Mozambique lags regional peers in corruption and governance indicators. Strong commitments to implementing the anti-corruption framework, enhancing judicial integrity, and improving property rights and contract enforcement are essential for fostering a predictable business environment.
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Policy Priorities: To harness its demographic dividend, Mozambique must adopt policies that support a broad-based, job-intensive, private sector-led growth model. Key priorities include facilitating economic diversification, boosting agricultural productivity, leveraging informality while incentivizing formalization, tackling fiscal dominance, expanding access to finance, and improving the business environment.
