HOW WILL WORLD ECONOMY IMPACT ON MOZAMBIQUE?

Falling fuel, mineral and commodity prices seem likely to have a very mixed impact on Mozambique. The rapid expansion of coal mining in Tete will surely slow down, in response to the sharp falls in international forecasts of steel production; watch for investors slowing down their projects. Mozambique may also be less tempting for other mining projects as prices fall.


The drop in oil prices raises serious questions about exploitation of the Rovuma basin. And many biofuel projects will be put on hold, because many forms of biofuel production are not viable under $80 per barrel.


For agriculture, the picture will be mixed. Prices of export crops are falling; cotton is hitting new lows, and cashew, which is seen as a luxury product, will come under price pressure in the US. But lower oil prices will also lower the costs of fertiliser and of marketing, which should encourage domestic food production.


The other worry for Mozambique is the widespread prediction that door countries will defer promised aid increases. If there is a settlement in Zimbabwe and aid budgets are frozen, some of the Zimbabwe aid will inevitably be taken away from Mozambique. SOURCE: HANLON 2008 (jh)