sustaining the expansion

7/30/2019 sustaining the expansion

1/15

Victor LledNovember 17, 2011

1

The Development Partner Group consists of heads of mission in Mozambique of bilateral donors, the UN, and the international financial institutions.2 This document has not been approved by the IMF Executive Board.


2/15

Outline of the presentation

Sub-Saharan Africa Economic Outlook: Sustaining the Expansion

Mozambique Economic Outlook

Recent Developments and 2011-12 Prospects

Policy Discussions : 3rd PSI review mission


3/15

Sub-Saharan Africa: Sustaining the Expansion

Providing the world economy expands at 4 percent this year and next,output growth is SSA is expected to be robust at 5 percent in 2011 and5 percent in 2012. LICs are particularly expected to do well.

2004 2005 2006 2007 2008 2009 2010 2011 2012

-2

-1

0

1

2

3

4

5

6

7

8

P

ercentchange

Low-income and fragile countries

World

-2

0

2

4

6

8

10

12

2004 2006 2008 2010 2012

Percentchange

Oil Exporters

MICs

World


4/15

Could the sub-Saharan African economy decouple and avoid anotherslowdown? This is very unlikely given the strong links between SSAexports and global trade volume indicators.


-80

-60

-40

-20

0

20

40

60

2 00 0M 1 2 00 1M 1 2 00 2M 1 2 00 3m 1 2 00 4m 1 2 00 5m 1 2 00 6m 1 2 00 7m 1 2 00 8m 1 2 00 9m 1 2 01 0m 1 2 01 1m 1

Trade value CPB trade volume index Non-Oil SSA


5/15


Policy challenges :

- Create and timely use the policy space to sustain the expansion

Some LICs need to consider tightening their monetary stance to restraininflationary pressures.

Countries in which fiscal deficits are not declining from their 2009-10 highs,and where growth remains strong, should focus on rebuilding fiscal policybuffers.

Slower-growing countries (mostly middle income) without financingconstraints should retain a supportive macroeconomic stance.

Oil exporters should be using their windfall gains to build up fiscal buffers.


6/15


Structural Challenges

Speed limitsEconomies are expanding at or near their highest rates of growth in

many years, and so supply bottlenecks are emerginge.g.infrastructure

Politics Several important elections in 2012 may delay necessary policy adjustments.

Financial Sector Deepening, with Effective Supervision

Inclusive Growth


7/15

How inclusive is Africas GrowthGrowth rate of real consumption per capita by percentile of the distribution:

the high-growth cases

1 10 20 30 40 50 60 70 80 90 100Consumption percentiles

Annualgrowthrate

(percent)

6

5

4

3

2

1

0

Ghana, 1998-2005


Annualgrowthrate

(percent)

8

6

4

2

0

Uganda, 2003-2010


Annual

growthrate

(percent)

9

6

3

0

Tanzania, 2001-2007


Annualgrowthrate

(percent)

7

5

3

1

-1

Mozambique, 2002-2008

Growth incidence 95 percent confidence bounds

Growth in mean Mean growth rate


8/15

How inclusive is Africas Growth :

Mozambique case with different deflators

-5

-3

-1

1

3

5

1 10 20 30 40 50 60 70 80 90 100

Expenditure percentiles

Growth-incidence 95% confidence bounds

Growth in mean Mean growth rate

Total (years 2008 and 2002)

Mozambique, 2002-2008

different regional deflators


9/15

Employment growth has been strong and rural agricultural employment

growth provides much of the explanation of per capita consumption growth

among the poorest households

Period

Total

Employment

Employment

Output

Elasticity

Urban

Employment

Agricultural

Employment

Rural Agricultural

Employment

Formal Sector

Employment1

Cameroon 200107 2.7 0.8 5.6 5.9 4.2 9.5

Ghana 19992005 3.4 0.7 6.1 3.5 1.4 13.3Mozambique 200309 4.4 0.6 7.4 3.4 -0.4 16.7

Tanzania 200009 3.3 0.5 8.8 2.3 2.1 9.5

Uganda 200209 7.5 1.0 9.8 6.0 6.4 13.9

Zambia 19982004 1.9 0.6 5.1 -0.2 -1.6 13.8

Memo items:

Cambodia 200407 4.2 0.4 4.5 3.9 4.7 25.0

Vietnam2 200007 2.9 0.4 6.1 -0.3 n.a. 44.0

Sub-Saharan Africa

(sample median) 3.3 0.6 6.8 3.5 1.8 13.6

1Latest estimate in percent of working-age population.2Agricultural employment is for 200008.

Employment Indicators(Annual percentage change, except where stated)

Sources: Household surveys; Vietnam Ministry of Planning and Investment and UNDP (2010); World Bank (2008).


10/15

Mozambique Economic Outlook :


Mozambiques growth performance remains robust,cementing the country as one of the fast growingeconomies in the Sub-Saharan Africa

While risks to the global economic turmoil haveincreased, Mozambiques medium-term macroeconomicoutlook remains positive.

2004-08 2009 2010 2011 2012 2004-08 2009 2010 2011 2012

Average Act. Est. Proj. Proj. Average Act. Est. Proj. Proj.

Real GDP (% growth) 7.8 6.3 6.8 7.2 7.5 5.3 3.2 5.5 5.2 5.8

Consumer prices (average, %) 10.2 3.3 12.7 10.8 7.2 8.4 10.6 7.5 8.4 8.3

Broad money (% of GDP) 30.3 40.2 42.0 39.5 40.6 42.0 49.5 48.0 47.9 48.2

Credit to the private sector (% of GDP) 14.4 26.8 29.1 28.8 30.5 17.3 20.8 21.6 26.9 20.6

Current account balance, incl. grants (% of GDP) -10.9 -12.2 -11.7 -11.2 -11.1 0.8 -2.3 -1.2 0.7 -0.5

Source: Regional Economic Outlook Su bsa haran Africa, I MF, October 2011; Projections from the la test PSI review mis si on.

Mozambique Sub-saharan AfricaMozambique and Sub-saharan Africa: Selected Economic Indicators, 2004-2012


11/15

The inflation rate in Octoberwas 0.01 percent, the lowestOctober rate in at least a decade:

This contributed to further

bringing the average in twelvemonths down to 11.9 percent.

The core measure of inflation hasalso followed this downward trend,by declining to 6.8 percent.

The end of period in twelvemonths is 8.3 percent, almost closeto the current projection under theIMF program (8.4 percent).

Inflation



-10.00

0.00

10.00

20.00

30.00

Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11

Inp

ercentagep

oints

Maputo headline inflation (in percent, 12 months,

end-of-period), Dec '07 to Oct '11

Total CPI Food CPI Non-Food CPI

Source: National Statistics Office (INE).


12/15

Exchange rates



22

24

26

28

30

32

34

36

38

40

-60

-40

-20

-

20

40

60

80

100

120

140

Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11

MT/

US$U

S$millions

Bilateral exchange rates and total trading among banks,

January '08 to November '11

BM dire ct inte rventions Tr ading among banks MCI (Banks-BM)

Sourc e: Central Bank of Mozambique. Latest data as of November 4, 2011.

EUR ZAR USD

Dec-10 0.2 -4.5 -7.2

Mar-11 1.3 1.4 -1.0Jun-11 -2.9 -3.1 -3.7

Sep-11 -13.2 -6.8 -0.1

Oct-11 3.4 3.5 -0.3

Jan-Oct 2011 -30.1 -13.8 -17.7

Obs: (+) depreciation of the Metica l; (-) appreciation of the Metical.

Monthly changes in exchange rates,

Dec 2010 to Oct 2011 (in percent)

The pace of the appreciation vis--vis the US dollar, slowed downrecently. The same applies to the SA Rand and to a lesser extent to theEuro.


13/15

Exchange rates



Nominal

effective

exchange rate

Real effective

exchange rate

30

40

50

60

70

80

90

100

110

120

Dec-00

Jun-01

Dec-01

Jun-02

Dec-02

Jun-03

Dec-03

Jun-04

Dec-04

Jun-05

Dec-05

Jun-06

Dec-06

Jun-07

Dec-07

Jun-08

Dec-08

Jun-09

Dec-09

Jun-10

Dec-10

Jun-11

Dec-11

Nominal and Real Effectve Exchange Rates(Index, December 2000=100)


14/15

Policy Discussions : 3rd PSI Review

Mozambique continues to weather the global economic turmoil remarkably well.

Mozambique is relatively well positioned to mitigate the impact of a severe global downturn.

Mozambiques record under the PSI remains strong.

Authorities focus to continue the disinflation effort in the short run is appropriate

- Monetary policy geared towards preserving low levels of inf lation while allowing financial deepening;- Fiscal policy: while supportive of the disinflation stance, will seek to step up public investment to close

the infrastructure gap and support expansion of social safety nets to address chronic poverty.

Medium-term : Sustain and achieve more inclusive growth- Create fiscal space : prudent concessional and non-concessional borrowing, maintain revenue

mobilization efforts with support from booming natural resource sector.- Better prioritize current spending, spend more on social support mechanisms- Scale-up infrastructure through the selection of appropriate projects and financing vehicles.- Enhance macroeconomic management of natural resources.


15/15

Thank you!www.imf.org/maputo

Documents

sustaining the expansion