Mozambique's economy has experienced a sharp slowdown since 2016, with average annual growth plunging to 2.9% compared to 7.9% before 2016. This stagnation has led to stalled per capita GDP growth and poverty affecting about two-thirds of the population. Key challenges include:
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Job Creation: Despite a young and growing population, Mozambique faces an urgent need to create jobs. The country requires about 0.55 million new jobs annually by 2030, yet the link between growth and employment has been weak, generating only one-fourth as many jobs per unit of per capita GDP growth as emerging markets outside Sub-Saharan Africa.
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Structural Transformation: The economy has shifted toward extractive industries (mining and LNG) rather than manufacturing, with manufacturing contracting since the 2000s. This reliance on capital-intensive sectors limits job creation and inclusive growth.
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Agriculture Productivity: Agriculture employs three-quarters of the workforce but suffers from low productivity due to limited access to inputs, finance, and irrigation. Only 12% of Mozambique’s land is cultivated, and smallholders face significant constraints.
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Informality: The informal sector dominates, accounting for about 95% of jobs, with most positions being low-paying and insecure. While some informal jobs offer training and higher productivity, transitioning to formal employment remains low.
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Infrastructure and Human Capital: Human development indicators are among the world’s lowest, with weak education, health outcomes, and limited access to electricity. Fiscal pressures constrain investment in education, health, and connectivity.
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Credit to the Private Sector: Credit expansion has stalled since 2016, with government borrowing crowding out private sector credit, weakening the finance–growth nexus. Many firms report limited access to credit.
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Governance: Mozambique lags in corruption and governance indicators, with weak accountability institutions and rule of law. Improving governance is seen as vital for unlocking growth potential.
Way Forward: To harness its demographic dividend, Mozambique must prioritize reforms including: diversifying toward labor-intensive sectors (agro-processing, tourism), boosting agricultural productivity, leveraging informality while promoting formalization, tackling fiscal dominance to free up spending on infrastructure and social protection, expanding access to finance, and improving the business environment through institutional reforms and digitalization.
