Mauritania Economic Outlook

Economic performance and outlook

The decline in iron ore prices resulted in weak growth of 0.8% in 2014 and 1.7% in 2015, but 2017 brought recovery, with growth estimated at 3.6% and projected to be 3% in 2018 and 4.6% in 2019, due to a revival in the public investment program, structural reforms, recovery in metal prices, and exploitation of recently discovered offshore gas deposits. In 2017, growth was driven by construction, agriculture, fishing, and land use, as well as gold and copper mining.

Macroeconomic evolution

The decline in iron ore prices continued to weigh on the country’s macroeconomic indicators; the budget deficit increased from 0.3% of GDP in 2016 to an estimated 0.6% in 2017, and foreign exchange reserves decreased from $100 million in 2016 (equivalent to 5.5 months of nonextractive imports) to $724.9 million in 2017 (equivalent to 4.2 months of nonextractive imports). However, the adjustment policy protected macroeconomic stability and reduced external imbalances. In 2017, inflation was contained at an estimated 2.7%, and the current account deficit as a share of GDP decreased an estimated 0.7 percentage point. The adjustment policy included fiscal consolidation, stronger banking supervision, gradual depreciation of the currency against the U.S. dollar, cessation of foreign exchange sales on the parallel market, and mobilization of external resources.

Tailwinds

For the third year in a row, Mauritania made progress in the World Bank’s Doing Business ranking due to its structural reforms aimed at cleaning up the business environment to promote business creation and investment. In the 2018 report, the country jumped 10 places to rank 150 out of 190 countries. Mauritania intends to continue efforts to remove constraints to business development—namely, limited access to finance, infrastructure deficit, and corruption. In January 2017, the country adopted a public-private partnership law. In February 2017, the country began talks with the International Monetary Fund (IMF) over a new three-year economic program, and finalization of an agreement under the Extended Credit Facility is expected soon.

Headwinds

Low export diversification makes economic growth fragile and vulnerable. The economic outlook remains dependent on external factors, such as commodity prices and foreign direct investment in extractive industries. Measures to diversify the economy are required as part of the 2016–2030 National Strategic Framework for Accelerated Growth and Shared Prosperity. Despite resurgent growth, the risk of financial instability remains high. In 2015–16, the slowdown in economic activity led to deterioration in the quality of bank assets, limiting the capacity for financial intermediation. External public debt also remains problematic. A combination of high indebtedness (68.4% of GDP in 2017, apart from the passive debt contracted with Kuwait), possible deterioration of raw material prices, amortization of the Saudi loan and other multilateral loans in 2018–22, and weak debt management capacity continues to raise the risk of overindebtedness. Youth unemployment stands at 14.6%, higher than the national rate of 10.1% and the adult rate of 5.9%. Young people, who constitute about 60% of the population, are the most exposed to underemployment, thereby offering recruitment targets for the Sahel’s terrorist groups, a situation that threatens the security of the country and the subregion.

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