Mauritius Economic Outlook
- The pace of economic growth was moderate in 2016, with the economy growing by 3.6% compared with 3.4% in 2015 reflecting a slight increase in domestic investment that was offset by weak external demand.
- Political stability and sound macroeconomic management continue to promote investor confidence. Higher skills and productivity levels would make the country more competitive and innovative.
- The government has demonstrated firm commitment to promoting, industrialisation and entrepreneurship, in an effort to boost sustainable economic growth and enhance the competitiveness of the economy.
Mauritius’ economy grew by 3.6% in 2016, following a slight pick-up in private investment but was offset by weak external demand. Economic growth was driven by the information and communications technology and financial and insurance sectors, which grew by 6.3% and 5.6%, respectively. These gains were offset by the poor performance of the construction and agricultural sectors, which contracted by 5.4% and 2.4%, respectively. Mauritius’ fiscal deficit was recorded at 3.4% of gross domestic product (GDP), by close of the fiscal year 2015/16, as the government rolled out a number of new social programmes but reduced capital spending. In July 2016, the Monetary Policy Committee (MPC) of the Bank of Mauritius (BoM) cut the key policy rate by 40 basis points to 4.0%, in the light of a benign inflation environment and subdued domestic and external demand. Headline inflation dropped throughout 2016, reaching 1.3% in December 2016. The primary factors underpinning the drop in inflation in 2016 were the decline in food prices (food items account for 27.3% of the Consumer Price Index [CPI] basket) combined with a drop in international oil prices (transport accounts for 15% of the CPI basket in Mauritius). The overall current account deficit narrowed to 3.9% of GDP in 2016 and should shrink further helped by tourism and persistently low oil prices. The country recorded gross international reserves of 4.9 billion US dollars (USD) at 30 November 2016, equivalent to 8.4 months import cover.
Mauritius benefits from political stability and sound macroeconomic management, with increased foreign direct investment (FDI) sustaining growth. Mauritius also benefits from its strategic positioning as a gateway for investments from Europe and Asia into Africa. The government’s long-term strategic vision has been set out in the country’s long-term policy document, Achieving the Second Economic Miracle and Vision 2030, and the short-to-medium term 2015-19 Government Programme which calls for a more diversified and inclusive economy. The Ocean economy is also a priority area.
The authorities are exploring innovative approaches to promote direct foreign investments and accelerate diversification and modernisation. The government aims to promote exports by developing closer links with importers and the exploitation of niche and regional markets, particularly in sub-Saharan Africa. Agreements with Ghana, Senegal and Madagascar, establishing Special Economic Zones (SEZ) in these countries to open up niche markets for Mauritius’ export industries have been approved. The vision of the current government to make Mauritius a nation of entrepreneurs is clearly set out in the 2016/17 budget speech, in which a series of measures were announced promoting the development and financing of micro, small and medium enterprises.