Authors: Martha Phiri, Asha Kannan
- Growth slowed from 3.4% in 2012 to 3.3% in 2013 on the back of weak external demand and muted domestic investment. Forecasts for 2014 and 2015 show a rebound with the growth rate rising to 3.5% and 4.1% respectively.
- Benefiting from wide-ranging structural reforms since 2006 and sound macroeconomic management during the global economic crisis, Mauritius in 2013 overtook South Africa to become the most competitive economy in sub-Saharan Africa, although emerging challenges in governance and structural bottlenecks in education are a concern for investors.
- Having the region's best business environment and most competitive economy, Mauritius is well placed to build on the progress it has made by participating in the global industry and services value chains.
Recent Developments & Prospects
Economic Cooperation, Regional Integration & Trade
Economic & Political Governance
Public Sector Management, Institutions & Reform
Natural Resource Management & Environment
Thematic analysis: Structural transformation and natural resources
The Mauritian economy has weathered the global slowdown relatively well in spite of its exposure to the euro area which accounts for nearly 60% of its exports and tourists. Anchored by robust countercyclical policies, the economy has maintained annual growth rates of above 3%, although the momentum has eased as the crisis has evolved. In 2013, real GDP growth rate slowed down to 3.3% from 3.4% in 2012, driven by weak sugar and textile exports and a fall in construction. Projections show a rebound to 3.5% in 2014 and 4.1% in 2015 on the back of continued strong performance in financial intermediation, information and communications technology (ICT) and a modest recovery in tourism. Consumer price index (CPI) inflation remains within the policy target having declined from 3.9% in 2012 to 3.5 % in 2013. In June 2013 the Bank of Mauritius (BoM) reduced the Key Repo Rate (KRR) by 25 basis points to 4.65% per annum to boost the slowing domestic economy as first quarter exports and tourist arrivals showed signs of slowing down.
Sustained structural reform and prudent fiscal management during the global slowdown have served Mauritius well, propelling the country to become the region's best business environment and most competitive economy. Benefiting from strong institutions that have helped the economy to withstand a protracted global slowdown, the country's sovereign credit rating at Baa1 further strengthens its competitiveness. Toattain a High Income Country status, the authorities need to address a number of remaining bottlenecks to further bolster competitiveness and reinforce investor confidence. Plans to strengthen public sector implementation capacity and improve the regulatory framework for public private partnerships (PPP) need fast-tracking to help accelerate implementation of public sector investment programmes. Fiscal consolidation should accelerate in line with the medium-term macroeconomic framework so as to achieve efficiency gains in budget execution and help achieve a more sustainable current account balance. Efforts to enhance education quality and relevance and innovation capacity should accelerate to address the emerging problems of skills mismatch and structural unemployment. The continued fall in the savings rate and its structural impact on the current account deficit is a concern. The monetary policy authorities will need to consider normalising the repo rate to help accelerate savings. Anti-corruption efforts should be strengthened to recapture the public's confidence and sustain the country's strong governance record.
With trade accounting for about 120.5% of GDP, the authorities would like to deepen the country's participation in cross-border value chains to drive growth sustainably. Their on-going efforts to position Mauritius as a regional hub for manufacturing, financial services, trade and knowledge under their Africa Strategy strengthens the prospects for further developing regional industry and services global value chains.
Table 1: Macroeconomic indicators
|Real GDP growth||3.4||3.3||3.5||4.1|
|Real GDP per capita growth||3||2.9||3.1||3.8|
|Budget balance % GDP||-2.1||-2.7||-1.7||-0.7|
|Current account balance % GDP||-10.4||-10.8||-10.4||-9.9|
Source: Data from domestic authorities; estimates (e) and projections (p) based on authors’ calculations.