The pace of Mozambique's economy contracted 3.251TP1Q in the second quarter of 2020 compared to the same period last year, after having registered positive growth of 1,681TP1Q in the first quarter.
This weak performance of the economy in the second quarter was due to the combination of the negative performance of several sectors, especially hotels and restaurants, which fell by 35,84%, extractive industry with a reduction of 25,55%, trade and repair services with a reduction of 5.69%, manufacturing industry with a reduction of 5.32%, transport, storage, information and communications with a reduction of 4,68% and fisheries with a reduction of 1.83 (INE, 2020).
The poor performance of these sectors is mainly explained by the effects of the measures taken to minimize the effects of the COVID-19 pandemic. In order to minimize these effects, fiscal and monetary policy measures were taken to safeguard employment and stimulate economic activity, which range from the approval of VAT exemption for oil and hygiene products to the introduction of a line 500 million credit card by the Central Bank, among others.
However, these fiscal and monetary policy measures adopted to face this pandemic were not effective enough to circumvent the negative impact of the government's containment measures aimed at mitigating the effect of COVID-19 on the economy and society. The lack of economic diversification, the weak situation of the social security system, the lack of transparency of public accounts, non-inclusive governance were the main obstacles to the effectiveness of the policies adopted in the first half of 2020. Therefore, the country does not has the capacity to sustain State of Emergency measures for prolonged periods.
In this sense, there is an urgent need for effective diversification of the economy in order to make it more resilient to extreme shocks. Additionally, with a favorable performance of the agriculture sector, it is necessary to further enhance and strengthen agricultural development programs. In the interests of transparency, we emphasize the need to improve the mechanisms for disclosing information on public expenditures in general and expenditures made to face COVID-19, in particular.
The relevance of inclusive planning that involves the potentially most vulnerable groups, women and young people in the informal sector, is also highlighted, as these are the ones that most suffer from the adverse impacts triggered by the pandemic and the restrictions imposed by the Government.
