Outlook for 2011-12

• The dominance of the ruling party, Frente de Libertação de Moçambique (Frelimo), over the economy and state will remain largely uncontested in 2011-12, as the political opposition is too weak to mount a serious challenge.
• The risk of widespread social unrest, particularly in poor urban areas, cannot be discounted, particularly given the outlook for sharp rises in global food prices in 2011.
• Policy will be guided by the three-year policy support instrument (PSI) with the IMF and the five-year strategy paper, Programa Quinquenal do Governo para 2010-14. Both target poverty reduction and economic diversification.
• The fiscal deficit in 2011 is forecast at the equivalent of 4.9% of GDP, falling to 4.4% of GDP in 2012 as subsidies are unwound. The deficit will be funded overwhelmingly by concessional loans from donors.
• Real GDP growth is expected to remain brisk in 2011-12, averaging 7.4% a year, on the back of increasing inflows of foreign aid and foreign direct investment into minerals and infrastructure mega-projects.
• In line with the latest outlook for global commodity prices and expected losses to local agricultural output owing to flooding, inflation is now forecast to average 7.5% in 2011, easing to 5% in 2012.
• The current-account deficit is forecast to narrow from an estimated 11% of GDP in 2010 to 10.7% of GDP in 2011 and 9.1% of GDP in 2012.

Monthly review

• Mozambique has reached an agreement with South Africa to allow patrols in the Mozambique Channel by the South African navy to counter the threat of Somali piracy.
• An official crackdown on private minibus taxis in the capital, Maputo, has led to chaos in the capital's transport system.
• The extractive industries sector in Mozambique should involve stronger economic linkages, transparency and dialogue, according to a recent report by a local research institute, Instituto de Estudos Sociais e Económicos (IESE).
• The state rail company, Companhia de Portos e Caminhos de Ferro de Moçambique (CFM), has signalled that it will end the contract granting an Indian firm, Ricon, the concession to operate the Beira-Tete railway line.
• The public works ministry has announced that the construction of a new bridge over the Zambezi River by Tete city is to begin this year. It is due for completion within three to four years, at a projected cost of around US$95m.