We forecast modest real GDP growth in Mauritius in 2016 and 2017, bolstered by falling oil prices, expansionary fiscal policy, and a recovery in investment. We forecast growth of 4.2% and 4.4% in 2016 and 2017 respectively, compared 3.2% in 2015.
Risks to political stability should be limited in the short-term, as the recently-elected government overseas a period of accelerating economic activity.
The government is set to put an emphasis on spurring economic growth ahead of fiscal consolidation, meaning an increase in the budget deficit is likely in the short term. This is unlikely to pose a serious threat to broader economic stability in itself, though higher deficits and rising public debt will leave the country more vulnerable to external shocks or shifts in investor sentiment.
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.
A lower than expected growth outturn over 2016 would increase the likelihood of a rate cut by the central bank.
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|
|Real GDP growth, % y-o-y||3.6||3.4||4.2||4.4|
|Nominal GDP, USDbn||12.6||11.6||11.9||13.0|
|Consumer price inflation, % y-o-y, eop||0.2||0.7||1.8||4.4|
|Exchange rate MUR/USD, eop||31.75||35.90||35.80||36.40|
|Budget balance, % of GDP||-3.2||-4.4||-5.0||-5.2|
|Current account balance, % of GDP||-5.5||-6.6||-6.4||-6.0|
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