Mozambique 2022 Consumer Outlook: Rising Food And Fuel Prices Weakens Consumer Outlook

Fitch Solutions / Consumer & Retail / Mozambique / Wed 17 Aug, 2022

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Key View

  • Real household spending growth will be limited in 2022 at just 2.0% y-o-y and climbing up to 3.5% y-o-y in 2023 as the economy struggles under the weigh of structural constraints such as low incomes, poverty and economic mismanagement.
  • Food and fuel price inflation is weighing heavily on organic growth and low- and mid-income households will see their discretionary spending powers erode.
  • Food security remains a crucial issue in Mozambique and international aid donor organisations continue to increase their efforts.
  • Our Country Risk team forecasts inflation to average 9% in 2022 and 8.3% in 2023 with food and fuel price inflation trending even higher. As such, real spending growth will not outpace inflationary pressures over the foreseeable future.

Outlook For 2022 And 2023

We forecast real household spending in Mozambique to grow by 2% in 2022 and 3.45% in 2023, with average growth being outpaced by inflationary pressures which will be higher at 9% in 2022 and 8.3% in 2023. While the market will continue to post nominal growth, we note that structural economic challenges such as chronic poverty, under-employment, economic mismanagement and low spending powers will all act as a drag. The average Mozambique household remains heavily price-sensitive and the burden of spending allocated towards basic food, water, medicine and fuel will remain very high over the short-term.

Very Limited Organic Growth On The Near-Term Horizon

Mozambique - Total Household Spending, Real Growth, % y-o-y (2018-2026)

e/f = Fitch Solutions estimate/forecast. Source: INE, Fitch Solutions

Insights Into Consumer Spending

Our forecast for positive growth in consumer spending in 2022 is in line with our Country Risk team's forecast for real GDP to grow by 5.3% in 2022, accelerating from 2.2% in 2021. We project Mozambique's average unemployment (as a % of the total labour force) to average 4.5% in 2022, remaining relatively consistent with 2021 levels of 4.2%. In 2023, we forecast real GDP growth at 6.5% and unemployment at 4.9%, that being said, inflationary pressures will average 9% in 2022 and 8.3% in 2023.


Mozambique's Economic Overview
  2022f 2023f
Real GDP (% chg y-o-y) 5.3 6.5
Unemployment (% of total labour force) 4.5 4.9
Consumer price inflation (% y-o-y, ave) 9.0 8.3
Total tourist arrivals, '000 % y-o-y 42.4 21.4
f = Fitch Solutions forecast. Source: National statistics, Fitch Solutions

Inflation Outlook

Inflationary pressures continue to build. Over the latter half of 2022, inflation is beginning to shift into services such as tourism. Rising consumer price inflation has been the key risk to consumer spending over 2022, and it has been eroding purchasing power and shifting consumer spending away from discretionary spending. This is the economic reality that consumers enter into in 2023. Inflationary pressure started to rise globally in 2021, as localised shortages were created by base effects, higher commodity prices and supply chain challenges. The Ukraine-Russia conflict has also significantly impacted the global supply prices of key commodities, such as oil and gas, fertiliser, wheat, corn and barley. The commodity price increases are already feeding through into higher consumer prices and this will continue over 2022.

Mozambique's consumer price inflation averaged 11.8% y-o-y in July 2022 (latest data available) significantly higher than the 5.5% y-o-y in July 2021. Furthermore, it is an uptick when compared to the December 2021 consumer price inflation of 6.7% y-o-y. Mozambique's food and non-alcoholic drinks inflation risk has consistently been above the headline inflation figure. In January 2021, food and non-alcoholic drinks inflation was 9% y-o-y. The rain and cyclone season (from October 2021 to May 2022) has recently been causing more severe floods than usual, with the most recent extreme weather event being Storm Ana coupled with the global commodity price shocks have been causing further pressures with food price inflation averaging 17.24% in July 2022, up from 10.4% in July 2021. Our Country Risk team forecasts Mozambique's consumer price inflation to average 9.0% in 2022 before moderating to 8.3% in 2023.

Food & Fuel Price Inflation Present Severe Downside Risks

Mozambique - Consumer Price Inflation, % y-o-y (2020-2023)

Source: INE Mozambique, Fitch Solutions

Wider Economic Challenges

Supply chain issues continue, having first appeared when economies globally started to reopen in 2021, with consumers demanding products that they had little access to over 2020. This continues to place pressure on manufacturers, with bottlenecks and consumer good shortages emerging, which has fed through into supply side inflation. For example, the global semiconductor shortage will continue through 2022 and into 2023, putting pressure on the supply of multiple consumer goods. In 2022, the risks surrounding Covid-19 have moderated, as population immunity (from vaccines and prior infection) combined with less severe variants of SARS-CoV-2 have meant that death rates have remained low through recent infection waves. This has seen many markets globally adopt a more 'live with Covid-19' approach to movement and operating restrictions, although some nations are retaining a ‘Zero-Covid’ policy.

More transmissible variants of SARS-CoV-2 and Mainland China’s zero-Covid are causing the disruption/closure of factory production and manufacturing across the world. Manufacturers are facing shortages of key components and higher raw materials costs. Inventory levels are increasing, as consumer demand shifts away from products and into services, such as tourism. This will elevate some price pressures, as companies offload stock at a discount. Finally, the Russia-Ukraine conflict continues to place significant supply pressures on key commodities, especially food supplies, pushing up final market prices across a spectrum of consumer categories. Some countries, such as India, Malaysia and Argentina have reacted by placing their own restrictions on the export of food items, putting further pressure on global prices. The graphic below highlights some of these risks to the outlook impacting Mozambique's consumer market in 2022 and into 2023.

Global Risks To Consumer Outlook
Risks To Outlook
Source: Fitch Solutions

This report from Fitch Solutions Country Risk & Industry Research is a product of Fitch Solutions Group Ltd, UK Company registration number 08789939 ('FSG'). FSG is an affiliate of Fitch Ratings Inc. ('Fitch Ratings'). FSG is solely responsible for the content of this report, without any input from Fitch Ratings. Copyright © 2021 Fitch Solutions Group Limited. © Fitch Solutions Group Limited All rights reserved. 30 North Colonnade, London E14 5GN, UK.

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