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- GDP (PPP):
- $31.1 billion
- 7.4% growth
- 7.3% 5-year compound annual growth
- $1,174 per capita
- Inflation (CPI):
- FDI Inflow:
Mozambique’s annual growth has averaged 7 percent over the past five years, driven by large-scale foreign-investment projects and relative macroeconomic stability. However, economic expansion has not translated into poverty reduction. Despite some progress, institutional shortcomings hold back development of the private sector and inhibit productivity growth.
Economic Freedom Snapshot
- 2016 Economic Freedom Score: 53.2 (down 1.6 points)
- Economic Freedom Status: Mostly Unfree
- Global Ranking: 139th
- Regional Ranking: 31st in Sub-Saharan Africa
- Notable Successes: Monetary Freedom and Trade Freedom
- Concerns: Corruption, Property Rights, and Labor Freedom
- Overall Score Change Since 2012: –3.9
Structural problems including poor management of public finance and underdeveloped legal frameworks have undermined private-sector growth, keeping many people and enterprises in the informal sector. Investment policies and regulatory efficiency are undercut by government interference in the economy and pervasive corruption.
The FRELIMO party, headed 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 RENAMO movement that ended with the Rome Peace Accords in 1992. In October 2013, after several clashes with FRELIMO, which has won the presidency and the majority in parliament in all national elections since 1994, RENAMO announced that it was pulling out of the peace accord. Both parties agreed to a new peace deal in September 2014 just before the October national elections, in which Filipe Nyusi was elected president. Despite political instability, Mozambique has emerged as one of the world’s fastest-growing economies and is expected to become a significant exporter of coal and gas.
Corruption, including bribery, raises the costs and risks of doing business and has a corrosive effect on the broader business climate in Mozambique. It also deters international investment, stifles economic growth and development, distorts prices, and undermines the rule of law. Although the government recognizes private property rights, they are not strongly respected, and law enforcement is inefficient and uneven. Judicial independence is limited.
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 22.9 percent of total domestic income. Expansion of the revenue base remains crucial. Government spending has increased to 34.9 percent of total domestic output, and budget deficits continue. Public debt has reached a level equal to over 50 percent of GDP.
The regulatory framework has undergone a series of reforms. Launching a business takes less than 30 days. Completing licensing requirements, however, takes more than 100 days. A recently passed labor law intended to make the labor market more flexible also increased overtime restrictions. Although the state has divested ownership of dozens of small businesses, it maintains interests in large enterprises such as the country’s largest bank.
Mozambique has a 7.1 percent average tariff rate. Land is owned by the government. New foreign investment is screened by the government, and investment in such sectors as mining and oil is subject to controls. The underdeveloped financial sector remains hindered by state regulations. Most citizens still lack adequate access to financial services.