The outlook for economic growth in Mauritius is far more precarious than it was three months ago, and in the wake of the UK's decision to leave the EU (Brexit), we now anticipate that real GDP growth will come in at just 3.2% in 2017, compared to our previous projection of 4.2%. The island nation is heavily exposed to both the UK and the EU, where we also expect that post-Brexit turmoil will result in slower growth.
Mauritius will see only a slight reduction in its budget deficit over the next several years. We expect that the government will seek to support the central bank's accommodative monetary policy through growth-generating spending. Even so, this will be limited by lacklustre revenue collection growth and concerns over increasing the debt burden.
The Mauritian rate-cutting cycle has further to go before the end of 2016. The Brexit vote will further jeopardise already weak demand, prompting the bank to seek to stimulate the economy.
We expect that Mauritius and the five partner states of the East African Community (EAC) will pursue greater political and economic ties over the coming years, especially in the wake of the island state's renegotiation of its trade deal with India. This will mean that the country will skew more towards Sub-Saharan Africa as it looks for growth markets to offset the likely loss of business and investment from India.
Should UK and EU growth slow more rapidly than we currently anticipate in the wake of the Brexit vote, then Mauritius would see substantially slower growth than we currently anticipate.
|e/f = BMI estimate/forecast. Source: National Sources|
|Real GDP growth, % y-o-y||3.6||3.4||3.5||3.2|
|Nominal GDP, USDbn||12.6||11.6||11.8||12.7|
|Consumer price inflation, % y-o-y, eop||0.2||0.7||1.5||2.5|
|Exchange rate MUR/USD, eop||31.75||35.90||35.80||36.40|
|Budget balance, % of GDP||-3.3||-3.5||-3.1||-3.1|
|Current account balance, % of GDP||-5.5||-3.6||-6.5||-7.4|
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