Mozambique's economy has experienced a sharp slowdown since 2016, with average annual growth plunging to 2.9% compared to 7.9% in the preceding decade. This stagnation has left two-thirds of the population below the poverty line, despite a young and rapidly growing demographic. Key challenges include weak job creation, with only one-fourth as many jobs generated per unit of per capita GDP growth as in other emerging markets. The economy's structure has shifted toward capital-intensive extractive industries like LNG, while manufacturing has declined, exacerbating employment issues. Agriculture, employing three-quarters of the workforce, suffers from low productivity due to limited access to inputs, finance, and irrigation. Informality dominates the labor market, accounting for about 95% of jobs, though some informal jobs offer relatively high productivity. Infrastructure and human capital gaps are significant, with Mozambique ranking 182nd in the UNDP Human Development Index, constrained by weak education, health outcomes, and gender disparities. Fiscal pressures limit social and development spending, with current expenditures reaching 26.4% of GDP in 2024. Credit to the private sector has stagnated since 2016, with government borrowing crowding out private credit. Governance weaknesses, including corruption and lack of rule of law, further hinder economic growth. To address these challenges, reforms must focus on economic diversification into labor-intensive sectors, agricultural modernization, leveraging informality while promoting formalization, tackling fiscal dominance, expanding access to finance, and improving the business environment through institutional reforms and digitalization. Mozambique needs to create about 0.55 million new jobs annually by 2030 to harness its demographic dividend and achieve inclusive, sustainable growth.
