Mozambique has seen an overall improvement in its risk outlook since January 2012, after the sovereigns position in the ECR rankings climbed seven positions last year, bringing the countrys global rank up to 101 and into ECRs tier four for the first time since September 2010.
This improvement has made Mozambique the 10th safest country in the sub-Saharan Africa (SSA) region, according to ECR economists, and it is now ranked alongside other emerging markets economies such as Nigeria, Kenya and Zambia.
The sovereigns climb in ECRs global rankings is largely due to enhanced economic performance, with the economy growing by 7.4% in 2012, according to the IMF.
Investment associated with the natural resource extractive industries remains a key driver of economic growth. The development of one of the worlds largest unexplored coal reserves in Tete province and the discovery of huge offshore natural gas reserves in the Rovuma basin, north of Mozambique, in 2012 have led to new growth opportunities and government revenue streams opening up.
The sovereigns improved growth outlook is confirmed by ECRs economic outlook indicator, which increased by 0.7 points to 5.2 in September 2012. The improvement in the sovereigns economic outlook indicator means it now boasts some of the best economic conditions in SSA.
FDI inflows as well as disbursement from highly concessional loans from development partners to the central government will remain the main source of inflows on the financial account, according to a report by Standard Bank.
The major expectations for the economy are coming from the extractive industries, he says. However, analysts may have to review their expectations on economic growth as the infrastructure remains unsupportive of large-scale economic development.
The government has no clear strategy on infrastructural reform due to insufficient funds. Unless the private sector provides leadership on structural development, I really dont see there will be an improvement in infrastructure.
The strain of structural hurdles on economic development is reflected in ECR data with a structural assessment score of only 18.2, the countrys infrastructure lags well behind the southern African average.
Among other notable score improvements for Mozambique is its government stability indicator, which ranks among the fourth highest in SSA, while the sovereigns regulatory and policy environment remains well-enforced in comparison to the regional average, according to ECR analysts.
Accounting for the improvements in the political landscape, Da Silva Francisco says: There has been a stride towards effective constitutional reform due to the upcoming municipal elections this year. In this sense, the processes for greater transparency and political stability are still improving.
There are signs the leadership is moving into transition and recently there has been a better working relationship between the main political parties. These developments have leant themselves to a more inclusive and workable political landscape.
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