Despite increasing fuel and cereal prices on the international market, Mozambique's economy grew as expected, the country's central bank said on Tuesday.

"As regards the economic performance, available information shows that in 2007 the economy grew 7.3 percent, in line with initial forecasts," according to Banco de Mocambique's annual report, released on Tuesday.

This was despite shocks in the form of rising prices of crude oil and cereals in the international market, which required periodic increases in domestic prices, wrote bank governor Ernesto Gove in the report.

Gove said the bank's plans to reduce inflation to a single digit were affected by the increase in prices of fuel and cereals on the international market. It managed to slow down the average annual inflation to 8.16 percent, from 13 in 2006.

The economic instability in Zimbabwe created "adverse side effects" for Mozambique.

In 2008 the bank would focus its monetary policy on maintaining economic growth at seven percent and reducing inflation to a single digit.

"The intermediate goals of monetary policy point to monetary expansion to the tune of 18.1 percent and a growth of credit to the economy of 21.7 per cent in the year (2008)," said Gove.

Sapa