We forecast real GDP growth of 3.9% in Mauritius in 2016, strengthening to 4.2% in 2017. This growth will be driven primarily by investment into major infrastructure projects, and ongoing efforts to diversify the economy away from the traditional sectors of sugar exports and tourism into a knowledge economy, taking advantage of its location in the centre of the Indian Ocean to attract business from Africa and Asia. The retail sector will provide some support to growth thanks to low inflation rates and loose monetary policy.
The Bank of Mauritius will cut rates in June as low inflation will enable it to try and stimulate fragile economic growth. There will be no further cuts through the second half of the year, and this will mark the end of the bank's cutting cycle.
Mauritius will maintain a wide current account deficit in 2016 and 2017. As this will be driven by the development of growth-supporting infrastructure projects, we do not expect the country's balance of payments dynamics to be of major concern for investors.
High youth unemployment rates raise the risk of further terrorist incidents in Mauritius over the coming years. High levels of conflict are very unlikely, but more events could jeopardise the vital tourism sector.
While we expect the eurozone recovery to strengthen in 2016, a significant deterioration in conditions would pose notable risks to our growth outlook given Mauritius's exposure to the region. France in particular gives cause for concern given its macroeconomic weaknesses and political failure to deal with them.
The recent uncovering of corruption scandals could harm the credibility of both the political class and the financial sector, both critical for the country's economic outlook.
|e/f = BMI estimate/forecast. Source: National Sources|
|Nominal GDP, USDbn||12.6||11.6||11.8||12.7|
|Real GDP growth, % y-o-y||3.6||3.4||3.9||4.2|
|Consumer price inflation, % y-o-y, eop||0.2||0.7||1.0||2.5|
|Exchange rate MUR/USD, eop||31.75||35.90||35.80||36.40|
|Budget balance, % of GDP||-3.3||-4.4||-5.0||-5.3|
|Current account balance, % of GDP||-5.5||-6.6||-6.4||-6.1|
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