"Unless we start to see significant economic reforms that encourage the distribution of gas benefits to the entire economy, Mozambique may face the same problems that limited growth in countries like Angola or Nigeria during the recent fall in the price of raw materials "write Fitch Solutions analysts.
In the most recent long-term analysis of the country's economy, sent to investors and to which Lusa had access, the experts of this consultant owned by the same owners of the financial rating agency Fitch Ratings recall that "several estimates point to the existence of between 100 to 185 billion cubic feet off the coast of the country, more than the total consumption in the United States for two decades ".
This, they say, "will lead to a transformation of the economy, with more growth, greater exports and large revenues, in addition to greater and more attractive business opportunities for foreign investors".
However, they add, "with the country unable to pass major structural reforms to transform the wealth of resources into a diversified economy and with higher standards of living for the population, Mozambique risks falling into the same trap as the raw materials it has harmed. growth in several economies dependent on natural resources, limiting opportunities in other sectors ".
At stake are the examples of Angola and Nigeria, which have an economic model that depends heavily on exports: "Regardless of the wealth and real GDP growth that an increase in gas could bring to the economy of Mozambique, the examples of Angola and the Nigeria reveal a dramatic slowdown in export growth following the collapse of prices in 2015 and 2016 ".
If gas plays a similar role, "the economy will be exposed to the same risks, with volatility in global gas prices likely to result in large and sudden changes in foreign revenues," they warn.
To avoid a fate similar to that of the two largest oil producers in the region, Fitch Solutions says it will be "necessary for the Government to implement various reforms to promote alternative methods of economic growth when prices fall, but this is a challenging prospect in the region, and in the case of Mozambique we are particularly skeptical about the Government's ability to implement this type of reforms due to the recent history of poor governance ".
Fitch Ratings' expectation is that "the economic outlook will improve over the next decade, as progress on natural gas projects offers a significant boost to long-term growth", this is after GDP has contracted 1.3 percent cent last year due to the covid-19 pandemic.
During this decade, however, the picture could be diametrically opposite: "When exports start, which we hope will happen in 2022, we anticipate an acceleration of economic activity, which means that Mozambique may have one of the highest growth rates in the world. Sub-Saharan Africa ", analysts predict.
This, of course, if the security situation in the north of the country, where the largest gas reserves in the region are located, improves, since fighting is currently "a significant threat to the development of the liquefied natural gas sector and the attractiveness of foreign investors. ".
Fitch Solutions, moreover, warns that "without more significant progress in the fight against insurgents, the risks of direct attacks on the sites of mega-projects will increase in the medium and long term".
