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- GDP (PPP):
- $33.2 billion
- 6.3% growth
- 7.0% 5-year compound annual growth
- $1,186 per capita
- Inflation (CPI):
- FDI Inflow:
Mozambique has undertaken reforms to encourage economic development, although progress has been very gradual. Private-sector involvement in the economy is substantial, but privatization of state-owned enterprises has slowed. Foreign capital is treated the same as domestic capital in most cases, and trade liberalization has progressed.
Lingering institutional and fiscal shortcomings have a negative effect on long-term economic development. Judicial enforcement is subject to corruption and political influence. The regulatory environment remains inefficient and burdensome. In recent years, the government has focused on restoring macroeconomic stability, particularly in view of an increasingly burdensome external debt and liquidity risks confronting the country.
The Mozambique Liberation Front (FRELIMO) party, headed since 2015 by President Filipe Nyusi, has been in power since independence from Portugal in 1975. Following independence, there was a 16-year civil war between FRELIMO and the rebel Mozambican National Resistance (RENAMO) movement that ended with the Rome Peace Accords in 1992. In October 2013, after several armed clashes with FRELIMO troops, RENAMO announced that it was pulling out of the peace accord. Despite a new peace deal in September 2014, violence has continued, and thousands have fled to Malawi. Previously undisclosed debts of about $1.4 billion amassed by the former government came to light in 2016, prompting donors to suspend budgetary support.
Although property rights are recognized by the government, they are not strongly respected, and enforcement of property law is inefficient and uneven. The judiciary is understaffed, inadequately trained, and subject to political influence. Corruption and extortion by police are widespread, and impunity remains a serious problem. Senior government officials often have conflicts of interest between their public roles and their private business interests.
The top individual income and corporate tax rates are 32 percent. Other taxes include a value-added tax and an inheritance tax. The overall tax burden equals 25.1 percent of total domestic income. Government spending has amounted to 37.3 percent of total output (GDP) over the past three years, and budget deficits have averaged 6.4 percent of GDP. Public debt is equivalent to 74.8 percent of GDP.
Despite some improvement, the overall business environment continues to restrain economic growth. A recently passed labor law was intended to make the labor market more flexible, but it also increased overtime restrictions. Although the government has divested ownership of small businesses, it maintains interests in large enterprises such as an aluminum smelter and the country’s largest bank and has expanded the state-owned energy company.
Trade is important to Mozambique’s economy; the value of exports and imports taken together equals 92 percent of GDP. The average applied tariff rate is 4.2 percent. All land is owned by the government, and state-owned enterprises distort the economy. Dominated by banking, the financial sector continues to evolve. The state retains shares in the banking sector, and a government-owned investment bank funnels funding to state projects.