With economic growth reaching 3.7 percent in 2022, Mozambique’s economy is gaining momentum amid a challenging global context. Agriculture and services saw a good performance, owing to higher agricultural productivity and the full resumption of mobility. Increased external demand and prices for Mozambique’s key export commodities, notably coal and aluminum have supported the recovery further. Growth is expected to accelerate in the medium term, reaching 6 percent over 2023-2025, driven by continued recovery in services, increased liquefied natural gas production, and high commodity prices. The medium-term outlook is positive but subject to substantial downside risks, including a protracted war in Ukraine, natural hazards, and conflict in the north. Considering the limitations of Mozambique’s current development model in its capacity to generate productive jobs, the 9th Edition of the Mozambique Economic Update explores role of services in driving sustained, inclusive economic growth and accelerated job creation, and discusses reform options to unleash the potential of services. The report shows that, despite being the largest (in terms of output share) and relatively the most productive sector, services are oriented towards less complex activities such as retail. Mozambique’s commercial services exports are dominated by traditional services (travel and transport). Therefore, services need to upgrade into more sophisticated and tradable activities such as ICT, finance, and professional and business services, to become an engine of inclusive growth and employment creation. Sustained, broad-based growth will also require raising productivity in services and stimulating the formalization of informal firms, while strengthening linkages between sectors.
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