Mozambique holds rate steady, signs of slower activity

    Mozambique's central bank held its benchmark standing facility rate steady at 9.50 percent, saying it would intervene in money markets to ensure that the monetary base does not exceed 39.70 billion meticais by the end of May compared with 38.81 billion at the end of April.
    The Bank of Mozambique (CPMO), which has held its rate steady this year after cutting by 550 basis points in 2012, said indicators of the economic climate pointed to lower economic activity, interrupting the upward trend that had been seen since July last year, while expectations regarding demand also showed a decline though employment prospects remained positive.
    Mozambique's inflation rate rose to 4.79 percent in April, up from 4.27 percent, though well below a peak of 16.6 percent at the end of 2010.
    "The behavior of inflation in the first four months of the year reflects a scenario of a difficult early year, marked by floods that affected the food supply in some markets, especially fruits and vegetables, as well as the increase in average prices of some commodities in the international market, which weighed on domestic inflation, without neglecting the strengthening of the U.S. dollar in the domestic foreign exchange market," the CPMO said.


    Following its recent visit to Mozambique, the International Monetary Fund (IMF) forecast that inflation would remain around 5-6 percent in the medium term despite the declining trend that was interrupted by the floods.
    The IMF said Mozambique's economy remains robust, "reflecting the rapid expansion in coal production as well as in financial services, transport and communications, and agriculture." 
      Last month the central bank cut its 2013 growth forecast to 7 percent from a previous 8 percent due to extensive flooding in the southern and central areas of the country in the first few months of the year, which affected mining output and agriculture. In 2012 the economy grew by 7.4 percent.
    Mozambique's Gross Domestic Product expanded by 2.3 percent in fourth quarter of 2012 for annual growth of 8.3 percent, up from a rate of 6.9 percent in the third quarter.
    The IMF also forecast that Mozambique's economy would expand by around 7 percent this year as mining expands and agricultural production recovers from the floods.
     The central bank said the metical was quoted at 30.02 against the U.S. dollar on the last day of April, equivalent to a monthly appreciation of 0.20 percent compared with a depreciation of 0.30 percent in the previous month, taking the cumulative and annual depreciation to 1.73 percent and 9.4 percent, respectively.

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