Mozambique sees easing inflation

Mozambique's economy is showing signs of strength and stability, with inflation easing and the central bank cutting rates to support growth. In a recent interview with CNBC Africa, Celio Hamide, Head of Sales and Global Markets at Standard Bank Mozambique, provided insights into the country's macroeconomic conditions and the factors driving the central bank's decisions. Hamide highlighted that Mozambique's inflation rate has dropped to around 2.75%, supported by stable food prices and currency stability. The central bank has been proactive in cutting interest rates, with a repo rate of 14.25%, and is expected to announce further rate cuts in the upcoming Monetary Policy Committee (MPC) meeting. Hamide forecasts a total cut of 150 basis points by the end of the year, with the repo rate projected to reach 12.75% in 2024. He emphasized the importance of monitoring inflation trends to determine the extent of future rate cuts. The financial markets in Mozambique have also responded positively to the rate cuts, with the MZN yield curve dropping and increased demand for fixed-return instruments. However, liquidity issues remain a concern in some segments of the market. The upcoming election in Mozambique is a significant event that could impact the country's economic development. Politicians have been making promises to voters, with a focus on attracting investments, particularly in the onshore oil and gas sector. Major projects, including LNG developments, are currently on hold pending the election outcome. The campaigns have been peaceful, and the election is expected to proceed smoothly, providing a favorable environment for investors. Despite the stability and performance of Mozambique's economy, there are risks to consider, including discussions around nationalization. Hamide acknowledged that nationalization could pose a risk but expressed confidence in the government's ability to handle such issues responsibly and maintain business confidence. Overall, Mozambique's economic outlook appears positive, with opportunities for growth in various sectors such as agriculture and tourism.