- GDP (PPP):
- $36.7 billion
- 3.0% growth
- 5.6% 5-year compound annual growth
- $1,244 per capita
- Inflation (CPI):
- FDI Inflow:
Mozambique’s economic freedom score is 48.6, making its economy the 163rd freest in the 2019 Index. Its overall score has increased by 2.3 points, with a surge in fiscal health and higher scores for government spending and the tax burden far surpassing small declines in property rights and monetary freedom. Mozambique is ranked 40th among 47 countries in the Sub-Saharan Africa region, and its overall score is well below the regional and world averages.
Mozambique has an unsustainable external debt burden, and macroeconomic stability is threatened by a sharp drop in capital inflows and relatively weak economic growth. The government borrowed $2 billion in 2012–2014 without parliamentary approval, leading the IMF to suspend lending and allowing China to increase its influence through opaque loans. The ongoing “hidden debt” scandal vividly illustrates the substantial institutional shortcomings, such as corruption and political influence on the judiciary, that are damaging long-term economic development.
The Mozambique Liberation Front (FRELIMO), headed since 2015 by President Filipe Nyusi, has been in power since independence from Portugal in 1975. A 16-year civil war between FRELIMO and the rebel Mozambican National Resistance (RENAMO) ended with a peace agreement in 1992. After several armed clashes with FRELIMO in 2013, RENAMO pulled out of the peace accord, and sporadic violence has followed. RENAMO head Afonso Dhlakama died in 2018 and was replaced by Ossufo Momade. An Islamist group in Mozambique’s marginalized and impoverished North escalated its attacks in 2018. The buildup of unauthorized debt has prompted aid donors to suspend budgetary support. More than half of the population remains below the poverty line and reliant on subsistence agriculture.
Although the government recognizes private property rights, they are not strongly respected, and private land ownership is prohibited. The judiciary is generally independent and impartial. Corruption and extortion by police are widespread, and impunity remains a serious problem. Senior government officials often have conflicts of interest related to their private business interests. A legal framework to combat corruption exists but is rarely used.
The top individual income and corporate tax rates are 32 percent. Other taxes include value-added and inheritance taxes. The overall tax burden equals 20.2 percent of total domestic income. Over the past three years, government spending has amounted to 33.2 percent of the country’s output (GDP), and budget deficits have averaged 6.3 percent of GDP. Public debt is equivalent to 102.2 percent of GDP.
Mozambique remains a challenging place to do business. Despite some improvement, the overall business environment continues to restrain economic growth. A recently passed law that was intended to make the labor market more flexible also increased overtime restrictions. Badly targeted fuel subsidies have increased government debt, but reductions in subsidies and further reforms of state-owned enterprises will face political resistance.
The combined value of exports and imports is equal to 108.9 percent of GDP. The average applied tariff rate is 3.5 percent. As of June 30, 2018, according to the WTO, Mozambique had three nontariff measures in force. Lingering institutional and regulatory shortcomings undermine the expansion of vibrant long-term investment. About 40 percent of adult Mozambicans have access to an account with a formal banking institution.