Republic of Mozambique - Staff Report for the 2011 Article IV Consultation, Second Review Under the Policy Support Instrument, and Request for Modification of Assessment Criteria - Staff Report; Staff Supplement; Public Information Notice and Press Release (Electronic book text)

1. Mozambique has had a continuous record of strong macroeconomic performance since the mid-1990s, and its performance compares well with other countries in the region. Output growth over the past decade averaged almost 8 percent. Growth has been sustained by investment financed by large aid and private capital inflows, mainly into the natural resource sector, that together averaged about 24 percent of GDP. In recent years, these flows contributed to an appreciation of the currency in real effective terms. Growth has also been sustained by a strong trade sector-the share of merchandise exports in GDP more than tripled, to nearly 30 percent of GDP, eliminating a trade deficit of about 30 percent of GDP. However, even before the current global crisis, growth had been weakening, with growth projections about 1 percentage point lower than in the past decade. Growth, however, has also been unevenly distributed and, although the national poverty headcount fell from 69 percent in 1997 to 54 percent in 2003, the 2007 assessment suggests that poverty may have increased in recent years, particularly in rural areas-though this may have reflected the impact of the 2005 drought and the surge in fuel and food prices in 2007-08.