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AfricaMoney | September 21, 2017

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MCB Focus sets lower economic growth of 3.8% against 3.9% by Statistics Mauritius

MCB Focus sets lower economic growth of 3.8% against 3.9% by Statistics Mauritius

The report undermines the growth target set by the government by stating that, “it is worth underscoring that the achievement of real GDP growth rates of 5.3% and 5.7% as per targets set by the Government for FY 2015/16 and FY 2016/17 respectively would necessitate a significant increase in the economic growth rate performance of Mauritius to more than 6% in calendar year 2016”.(Image: Composite)

Mauritius is likely to achieve a lower growth rate of 3.8% compared to 3.9% forecast by Statistics Mauritius, noted the Mauritius Commercial Bank (MCB) in its Focus publication.

However, while projecting a lower growth rate, the MCB Focus projects a nominal GDP at market prices which overshoots that of Statistics Mauritius by around Rs 6 billion to stand at Rs 418 billion. This is because a relatively higher deflator effect linked to the depreciation of the effective exchange rate of the rupee would led a decline of USD 9200 to the GDP per capita as compared to 2014.

Having said that, the local economy should be favoured by declining oil prices. However, the euro weakening by nearly 20% against the US dollar would affect negatively on the terms of trade, thus impacting the current account deficit adversely, since Mauritius’ main revenues are denominated in Euro.

MCB Focus classifies Budget 2015 as being “multifaceted and complex insofar as they are dependent on multiple key success factors “.

The Budget’s fundamental objectives was to achieve a high investment and high employment environment, accomplishing sustainable socio-economic development, promoting greater social equity and justice and fostering good governance in the management of public affairs.

The report highlighted that the long-term efficiency impact of some fiscal incentives and measures should be carefully monitored, economic gains could be maximised by envisioning and executing additional structural reforms, thereby assisting the country to increase its long-term potential growth rate to above 5% over the medium term.

In terms of forecasts for main economic indicators, the MCB forecast unemployment rate to be 7.8% for 2015, as for inflation and current account deficit, the figures stand at 2.7% and 9.3% respectively, given that the national budget did not include measures that would yield a direct and material impact on consumer prices.

For the local economy, beyond the short term, a relative acceleration in activity levels can be predicted for 2015 and 2016 while the report undermines the growth target set by the government by stating that, “it is worth underscoring that the achievement of real GDP growth rates of 5.3% and 5.7% as per targets set by the Government for FY 2015/16 and FY 2016/17 respectively would necessitate a significant increase in the economic growth rate performance of Mauritius to more than 6% in calendar year 2016”.

On the international front, the MCB noted that, while partly benefiting from the favourable impact of falling oil prices and stronger US growth, the world economic recovery process is, as per the latest indications from the IMF, still being viewed as being “sluggish, fragile and skewed.”

Finally, the report highlighted a downside in terms of the manifestation of excessive volatility in international financial markets as a result of the adoption of ‘asynchronous’ monetary policy actions and the generation of prolonged recessionary and deflationary phases worldwide should the euro area and Japan linger into a ‘low growth-low inflation’ gear.

It may be noted that the Focus is a prestigious publication by the MCB, Mauritius’ largest bank by market share, that provides economic updates in a global and local context for the island economy.

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