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Prospects and Challenges: Mozambique's Growth and Human Development Outlook to 2040

Purpose and Scope: This report uses the International Futures (IFs) forecasting system to analyze and provide an overview of Mozambique’s progress in a historical and regional context, show its expected trajectory across a number of core development sectors, and explore alternative futures through scenario analysis. It explores five-year alternative scenarios that simulate the successful implementation of various health, education, agricultural, and governance related programs between 2018 and 2022 and evaluates their long-term impact (out to 2040). It also includes two broader positive and negative possible trajectories in order to frame uncertainty around Mozambique’s future. 
In this sense, this report is meant to offer a framework in which to think about and evaluate long-term effects and tradeoffs of successful policy interventions across sectors, rather than to offer sector-specific policy and implementation guidance. 
The report was financed by the Embassy of Ireland in Mozambique, as an input into the development of their Country Strategy 2018-22, and developed in collaboration with the National Directorate for Economic and Financial Studies of the Ministry of Economy and Finance. The process included updating the model with national data, consultations with national stakeholders in Maputo including government officials, civil society and international development partners, and a scenario workshop to explore the range of interventions in the model. 
Overview: Mozambique has experienced significant progress across many areas of human development over the past 20 years. Economic growth has averaged 7%, life expectancy has improved by over 10 years, gross primary enrollment has increased by nearly 60% and agricultural production has increased by 50% over this period. While this progress has improved the lives of some Mozambicans, it has not translated into inclusive growth and development for much of the population. 
Mozambique continues to lag behind its peers in key human and social development indicators. The number of people living in extreme poverty has risen by over 5 million since 1995, the number of those without access to improved water and sanitation has risen by nearly 4 million and more than 7 million, respectively, and Mozambique still has one of the lowest levels of educational attainment in the world. 
The recent discovery of natural gas has generated great optimism for the country’s future. However, natural gas production and ensuing GDP growth will not be a panacea for Mozambican development. Natural gas production is forecast to drive large gains in economic growth from the mid-2020s to the early 2030s, but rapid population growth, rising inequality and lack of access to basic services and infrastructure means that much of this growth may not benefit the poor. Even with a significant increase in gas production and growth, the absolute number of people living in extreme poverty is forecast to be nearly the same in 2040 (18.7 million) as it is today (19 million). 
Without a concerted effort to invest in human development and improve government capabilities, it will be difficult for Mozambique to ensure long-term inclusive growth and development regardless of the outcome of natural gas production. Moreover, it is extremely important that Mozambique improve its ability manage natural gas revenues to ensure that the windfalls benefit all Mozambicans. 
Takeaways: Our analysis finds that a five-year push to improve various aspects of human development, governance, and agricultural production will help to put Mozambique on a path towards inclusive growth and development. More specifically, Mozambique, with the support of its development partners, should strive to: 
• Improve family planning and care. Mozambique’s young and rapidly growing population (estimated to reach 53 million by 2040) makes it difficult to provide access to quality basic services for much of the population. Improving family planning (and child and maternal care) will help to reduce this strain. 
• Extend health services and nutrition. Mozambique has a large communicable disease burden, especially in infants and children under five. Extending health infrastructure, increasing food availability, improving antiretroviral access, and extending malaria testing and prevention services will help reduce this burden. 
• Advance education. Mozambique has the second lowest primary survival rate in the world – only 40% of the students who enter primary school make it to the final grade. Improving survival rates and graduation rates will increase attainment across all educational levels. 
• Boost agricultural production. Given the importance of the agricultural sector in both sustaining livelihoods of the poor and vulnerable and improving food security, increasing domestic production will have positive long-term effects on poverty and food import dependence. 
• Strengthen governance. Mozambique will need to improve its ability to manage gas revenues and invest in basic services for its rapidly growing population. 
Interventions in each of these areas have strong positive effects within each individual sector, but they also have important effects across broad development indicators. Boosting agricultural production, improving family planning, and strengthening governance have the largest positive effects on extreme poverty. Meanwhile, strengthening governance has the biggest impact on overall economic output and advancing education has the largest impact on the Human Development Index (HDI). 
While each of these sectoral interventions address an important facet of Mozambique’s development, a broad effort to improve outcomes across all these sectors will help set the country on a track toward inclusive growth and development. An integrated development push across all the above sectors results in a 14% increase in GDP, a 17% increase in government revenue, a 15% reduction in infant mortality, and a 23% reduction in people living in extreme poverty compared to the current trajectory. 
However, delayed gas production, reductions in government effectiveness and limited progress across development sectors could result in stalled development and have huge impacts on the most vulnerable Mozambicans. A stalled development scenario results in a 24% reduction in GDP, 31% reduction in government revenue, an 18% increase in infant mortality, and over a 60% increase in the number of people living in extreme poverty relative the country’s current trajectory.