Commodity woes and drought will hit Mozambique growth

Subject

Economic outlook for Mozambique.

Significance

South African investor SacOil Holdings last week formalised an agreement allowing work to proceed on a 6-billion-dollar, 2,600-kilometre natural gas pipeline from northern Mozambique to South Africa. While providing a boost for the Mozambique government's longer-term plans to develop its liquefied natural gas (LNG) sector, it will do little help the country's economic prospects for 2016, which are weakened by drought and low prices for its main exports.

Impacts

• The recent attack by RENAMO militants in Manica province will push the government to increase troops in central and northern areas.
• This could lead to an escalation of violence, resulting in some population displacement to neighbouring Malawi.
• Resulting disruptions to agricultural planting and harvesting cycles would exacerbate regional food insecurity.