The coming year will see President Armando Guebuza campaigning for a second term after the country has been marked by substantial changes to political and economic management, away from liberalism and towards tighter control by the ruling Frente de Libertação de Moçambique (Frelimo). Under Guebuza, Frelimo's brand of politics is rooted in the sense of entitlement of the incumbent liberation movement, in power since independence. Despite widespread unease about the tightening political space, the country will continue on its current trajectory that combines robust growth, high inflows of foreign direct investment and donor support for poverty reduction.

The political scene will heat up as it enters a prolonged period of electioneering, which started with municipal elections in November 2008, ahead of all-important national elections due for December 2009. Frelimo will win these decisively, but the standards of democratic transparency have fallen substantially since Guebuza's controversial election campaign in 2004 which, although not stolen, was condemned for irregularities and state bias. Voter participation - which fell from 85% in 1994 to 36% in 2004 - will be low enough to indicate widespread resignation in the face of Frelimo's assertiveness. The ruling party will aim to extend its control over the strongholds of the main opposition, the former rebels, Resistência Nacional de Moçambique (Renamo) in the centre and north. Having made inroads, Frelimo is determined to win the provinces it does not already control.

With Guebuza as Frelimo's candidate in 2009, the preliminary stages of a succession will begin, in which old guard figures and a younger generation of leaders compete. Guebuza may recognise that the party needs renewal even though it is firmly under the thumb of his supporters. Regular cabinet changes have underlined that under-performance will be punished and that loyalty to the old guard is not enough to ensure political survival. Technocrats are being promoted, a trend that is expected to continue.

The economy will perform strongly, extending one of the longest growth periods of any African or emerging economy, with average real GDP expansion of roughly 8% for 16 consecutive years. That performance is backed by strong macroeconomic management and high levels of foreign direct investment and international aid. Quite a few mega-projects are moving to implementation, including a fuel pipeline to South Africa, expansion of gas exports, hydroelectricity and exploration of the promising oil and gas fields where international interest by first-tier firms is on the rise.

Mining is entering a boom that will transform it into a prominent sector of the economy in the short term. Projects like Vale's $1.2bn Moatize coal mine and investments by Indian steel companies have the potential to transform Mozambique into a significant international coal producer.

The economy has been hurt by falling aluminium output as a result of South Africa's electricity shortages and rising imported inflation. Growth in mega-projects disguises underlying weakness in the rest of the economy where labour-intensive export growth has yet to take hold. Serious structural problems include an adverse business environment. The authorities have been urged by donors to increase the pace of structural reforms if constraints are to be addressed and growth and poverty reduction sustained. Foreign aid in 2009 may fall for the first time in years, after several donors cut their pledges in response to lack of action on corruption.