The Bank of Mozambique acknowledges the economic impact and rising inflation due to the current conflict in the Middle East, a region that accounts for 12% of Mozambique’s total international trade, mainly in terms of imports.
The Economic Situation and Inflation Prospects report, completed this month by the Bank of Mozambique and to which Lusa had access this Monday, states that the country’s economic dependence on the Middle East is “more significant on the import side”, representing 19.8% of the total volume, and exports have a weight of 3.2%.
In terms of imports, fuel is the most vulnerable product for Mozambique, with 74% of supplies guaranteed through the Middle East, and in terms of fertilizers and cement, “imports of which from this region account for about half of Mozambique’s total imports.” these items”.
“However, in the case of fertilizers, the potential effect of the geopolitical crisis in the Middle East may be partially mitigated by domestic production, since Mozambique’s fertilizer export volumes are equivalent to 1.4 times the volume of imports from the Middle East,” the Bank of Mozambique emphasizes.
On the export side, “the greatest vulnerability lies in aluminum wire,” but the central bank says the Middle East “is not one of the country’s major export markets for its goods and therefore a geopolitical crisis in the region has the potential.” negligible direct impact on export earnings.”
“From an analysis of the country’s commercial relations with the region, it can be concluded that the scale of the impact of this crisis on the Mozambican economy will depend on the extent of the conflict, and two main scenarios can be envisaged,” the Bank of Mozambique’s report suggests.
If the conflict between Israel and Hamas continues in the Gaza Strip, “limited only to current participants”, the central bank of Mozambique believes that “the flow of goods through the Strait of Hormuz may continue with some restrictions”, which will lead to “increased transaction costs, which could therefore cause inflationary pressures from which Mozambique will not be exempt, due to the significant volume of fuel that the country imports from this region and given its significant weight.”
If the conflict “spreads, especially with the direct involvement of Iran,” it will lead to “the closure of the Strait of Hormuz” and “the availability of fuel will decrease, which could lead to higher prices.” of this product on the international market as a result of increased transport costs.”
“Import costs for Mozambique will therefore be extremely high, leading to increased domestic inflationary pressures. The potential indirect effects arising from the use of fuel as a feedstock in all sectors of activity must also be taken into account, with a focus on transport,” it says.
On October 7, militants from the Islamic Resistance Movement (Hamas), which has ruled the Gaza Strip since 2007 and is classified as a terrorist organization by the United States, the European Union and Israel, carried out an attack on Israel on an unprecedented scale. territory since the establishment of the State of Israel in 1948, resulting in the deaths of more than 1,200 people, mostly civilians, five thousand injured and about 240 hostages.
In response, Israel declared a war to “eradicate” Hamas, which began with cuts in supplies of food, water, electricity and fuel in the Gaza Strip and daily bombings followed by a ground offensive.
Author: Lusa
Source: CM Jornal
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