Macroeconomic Indicators and Performance - Mozambique 2025

Mozambique's economy in 2025 is navigating a period of complex volatility, characterized by a fundamental reliance on its extractive megaprojects—especially Liquefied Natural Gas (LNG)—counterbalanced by significant domestic challenges stemming from political instability, high public debt, and foreign exchange shortages. Although the long-term outlook remains positive due to natural resource wealth, the near-term economic performance shows mixed signals of recession and resource-driven recovery.

Macroeconomic Performance and Growth Drivers

Mozambique was historically known for robust growth, averaging about 7.9% over the 15 years preceding 2016, placing it among Sub-Saharan Africa's fastest-growing economies. This momentum was severely disrupted by external shocks, the hidden debt crisis, cyclones, and conflict.

GDP Growth (2025 Outlook)

Economic recovery continued from 2021 (2.4%) and 2022 (4.2%), reaching a significant growth of 5.4% in 2023. This growth was mainly driven by the favorable performance of the extractive industry, particularly the production and export of LNG from the Coral South field.

However, the economic outlook deteriorated sharply leading into 2025:

Recessionary Signs: Annual real GDP growth slowed to 2.2% in 2024, driven by post-election protests and climate-related shocks. The economy experienced a consecutive GDP contraction of 3.9% in the first quarter of 2025, indicating the economy entered a recession.

2025 Forecasts: Projections for 2025 show a rebound, primarily fueled by the extractive sector. Forecasts for real GDP growth in 2025 vary, reflecting the underlying instability:

• African Development Bank (AfDB) projects 2.7%.
• The World Bank projects 3.0%.
• Other estimates place growth at 2.5%.
• The government's projection is higher at 4.7%.

Sectoral Composition and Drivers

The Mozambican economy is comprised primarily of low value-added services and subsistence agricultural production. Key existing economic activities are services (46.1% of GDP) and agriculture (31.5% of GDP).

Extractive Industry: The production and export of liquefied natural gas (LNG) is the single largest growth factor. LNG megaprojects are expected to be an important catalyst for economic growth, supporting debt sustainability and potentially leading to 80% higher GDP by 2040.

Inflation and Monetary Policy

The Banco de Moçambique (BdM) maintains a tight monetary policy stance, although it has begun a loosening cycle in response to stabilizing prices.

• 2025 Inflation Projections: Inflation is generally forecast to remain low, averaging around 4.4% (Oxford Economics) or 4.8% (AfDB). IMF projections for 2025 inflation stand at 4.3%. The government's own forecast is approximately 7% for 2025.

• Monetary Easing: The BdM has been steadily reducing its policy interest rate, the MIMO rate. On September 29, 2025, the central bank slashed the MIMO interest rate by 50 basis points to 10.25%, marking the 11th consecutive reduction. Further cuts reduced the rate to 9.75% by November 2025. This easing reflects expectations of single-digit inflation in the medium term and a stable exchange rate.

• Real Interest Rates: Despite monetary easing, real interest rates remain high and credit growth is subdued, reflecting the country's high sovereign-bank nexus and significant public sector gross financing needs.

Fiscal Position and Public Debt

Mozambique remains highly leveraged, with high public debt constraining fiscal space.

• Public Debt: Public sector debt remains high and is assessed as being in distress, although sustainable in a forward-looking sense due to LNG revenue expectations.

• Public debt was 93.9% of GDP in 2023.

• It is projected to reach 97.5% of GDP in 2024 and 98.7% of GDP in 2025 (IMF projections). Other sources project 96.5% of GDP in 2025.

• External debt accounts for a significant portion, projected at 67.6% of GDP in 2025.

• Domestic debt is continuing to grow and represents over 40% of the total debt stock.

• Fiscal Balance (Deficit): The overall fiscal deficit (after grants) is expected to widen before declining due to high debt servicing costs and public investment needs.

• The deficit was estimated at -2.8% of GDP in 2023.

• The deficit for 2025 is projected by the government to be USD $1.9 billion, or 2.9% of GDP (according to the PESOE 2025).

• The AfDB forecasts the fiscal deficit to increase to 5.4% of GDP in 2025.

• Other estimates place the fiscal balance (deficit) at -5.6% of GDP in 2025.

• Revenue Mobilization: The government seeks to boost revenue mobilization, aiming to reach 25% of GDP. Tax revenue collected by Mozambique (above 25% of GDP in the past decade) is above the African average, although the bulk of this revenue comes from megaprojects. LNG revenues were expected to decline in 2025 compared to 2024 ($91.8 million).

• Debt Management: The government approved the Medium-Term Debt Management Strategy for 2025-2029 in November 2025 to define a prudent framework for public debt management and ensure sustainability.

External Sector Indicators and FDI

Mozambique's external position is characterized by high inflows of Foreign Direct Investment (FDI) necessary to finance a persistently large current account deficit.

• FDI Performance (2025): FDI inflows surged in the first quarter of 2025, more than doubling the performance of Q1 2024, reaching nearly US$1.626 billion. This robust performance was driven primarily by Major Projects (MPs), totaling $1.5 billion, with natural gas attracting approximately US$1.234 billion and coal mining attracting about US$282 million.

• FDI Forecast: The government expects total FDI to reach US$5.071 billion in 2025. This optimistic trajectory is influenced by the expected resumption of construction of the TotalEnergies LNG unit and Eni's second platform. FDI is expected to be propelled to a record high in 2026.

• Current Account Deficit (CA): The CA deficit remains massive, projected to widen to -41.3% of GDP in 2025. The increase is primarily due to rising import levels associated with LNG megaprojects. The deficit in the joint balance of the current and capital accounts saw a decrease of 16.9% to USD 628.0 million in the first quarter of 2024, driven by a contraction in the current account deficit by 20.8% to USD 646.4 million.

• Trade Balance: The trade balance deficit fell by 9.8% in the first quarter of 2025, reaching around $540 million.

• International Reserves: Gross international reserves stood at USD 3,646.1 million in the first quarter of 2024, sufficient to cover 3.1 months of imports of goods and services (or 4.8 months excluding megaprojects). Reserves are projected to decrease to cover 4.5 months of imports in 2025. Businesses in 2025 faced a constrained foreign exchange supply, with the backlog increasing to an estimated USD 600 million by June 2025. The freezing of the exchange rate is contributing to this foreign currency shortage, hindering necessary imports like wheat.

Key Risks and Social Context

The economic narrative of 2025 is dominated by risks that challenge the translation of resource wealth into inclusive growth:

1. Political and Security Instability: Post-election unrest in late 2024 and the ongoing security challenges in the north pose major downside risks to growth and investment. The new government inherited a challenging political context, which compromises the consolidation of state revenue.

2. Climate Shocks: Adverse weather conditions, including cyclones and drought, pose risks to agriculture, infrastructure, and public finances.

3. Debt Risks: The high debt burden (both domestic and external) limits the fiscal space for public investment and makes the economy vulnerable to refinancing risks and adverse shocks. Debt service to exports is projected to be 25.1% in 2025.

4. Poverty and Inequality: Despite robust growth periods, poverty remains high. The national poverty rate increased to 62.9% by 2022, with 20.4 million people living in poverty. The economy remains reliant on labor-intensive, low-productivity agriculture, which sustains most poor households, hindering poverty reduction.