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The Mauritian Economy: 2012 Outlook
Executive Summary
Bracing for another storm
While the Mauritian economy has been resilient thus far, the flip-flops in select
Government policies have sent mixed signals to both the private sector and potential investors. Nonetheless, the economy grew at an estimated 4% in 2011 driven by a resurgent textile industry, and a strong performance by the financial sector. A year ago we had believed that the worst was behind; however, the issues surrounding the unsustainable levels of sovereign debt in Europe have now induced a localised mild recession. This will hurt demand and coupled with a weak EUR, we expect stagnation across a few sectors. Consequently, AXYS continues to adopt a conservative stance and projects a GDP growth rate of 3.4%. Our expectations are below that Statistics
Mauritius’ 4% and the IMF’s 3.7% respective forecasts.
2012 in Perspective
While export manufacturing did recover in 2011, we expect a slow down for receipts from Europe-facing exports, although US-facing exports should show signs of improvement. The absence of major projects coupled with government-driven PSIP delays will lead to a lethargic year for construction. On the Real-Estate front, we expect rentals to face downwards pressures in the coming years given the completion of several new malls, business parks, and residences. On the plus side, we believe the financial sector will become Mauritius’ primary growth engine during
2012. Tourism will continue to struggle due to excess room capacity on the island; while the Sugar industry could see improved yields at adequate rates; although drought conditions and a weak EUR represent a threat.
The current account deficit should remain under 9% of GDP increasing slightly due to lower export revenue; however with inflation set to drop under 5%, we would expect cuts in the Key Repo Rate during the upcoming months to alleviate the interest burden on leveraged enterprises. AXYS expects
Executive Summary
Bracing for another storm
While the Mauritian economy has been resilient thus far, the flip-flops in select
Government policies have sent mixed signals to both the private sector and potential investors. Nonetheless, the economy grew at an estimated 4% in 2011 driven by a resurgent textile industry, and a strong performance by the financial sector. A year ago we had believed that the worst was behind; however, the issues surrounding the unsustainable levels of sovereign debt in Europe have now induced a localised mild recession. This will hurt demand and coupled with a weak EUR, we expect stagnation across a few sectors. Consequently, AXYS continues to adopt a conservative stance and projects a GDP growth rate of 3.4%. Our expectations are below that Statistics
Mauritius’ 4% and the IMF’s 3.7% respective forecasts.
2012 in Perspective
While export manufacturing did recover in 2011, we expect a slow down for receipts from Europe-facing exports, although US-facing exports should show signs of improvement. The absence of major projects coupled with government-driven PSIP delays will lead to a lethargic year for construction. On the Real-Estate front, we expect rentals to face downwards pressures in the coming years given the completion of several new malls, business parks, and residences. On the plus side, we believe the financial sector will become Mauritius’ primary growth engine during
2012. Tourism will continue to struggle due to excess room capacity on the island; while the Sugar industry could see improved yields at adequate rates; although drought conditions and a weak EUR represent a threat.
The current account deficit should remain under 9% of GDP increasing slightly due to lower export revenue; however with inflation set to drop under 5%, we would expect cuts in the Key Repo Rate during the upcoming months to alleviate the interest burden on leveraged enterprises. AXYS expects
References: Ministry of Finance, Growth for the Greater Good (Budget Speech 2012), November 2011.