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AfricaMoney | September 22, 2017

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Moody’s: Mauritius diversified & resilient economy to attain 3.6% growth in 2015& 2016

Moody’s: Mauritius diversified & resilient economy to attain 3.6% growth in 2015& 2016

Moodys rating agency considers Mauritiuseconomic outlook to be healthy and forecasts real growth of 3.6% in both 2015 and 2016 with the countrys relative wealth and diversification as well as the authorities proactive policies all supporting the economy to score a stablegrowth outlook with a Baa1 rating. (Image: Company )

 Moodys has accredited Mauritius with a Baa1 rating, indicating a stable economic outlook for the small yet diversified economy, and stating in its latest credit analysis of the country published this week that the island economy has a good record of attracting investment and exhibits resilience against external shocks.

Mauritian authorities key challenges will continue to be fostering domestic and foreign investment, maintaining the country’s financial stability and consolidating public finances to help meet the government debt reduction commitments.

“While Mauritius has a small and open economy that is susceptible to external shocks, it also has an impressive record of resiliency,”said Lucie Villa, Assistant Vice President and co-author of the report.

“The country’s relative wealth and diversification and the authorities proactive policies all support the economy,”she adds.

Moody’s considers Mauritius economic outlook to be healthy and forecasts real growth of 3.6% across 2015 and 2016, in line with historical averages.

Moreover, it notes that Mauritius stands out in the region for its ease of doing business, its low taxes, and the importance given to the private sector’s views when the government shapes economic policy. Also, ample liquidity is available in the domestic capital market and supports the government’s capacity to access local currency denominated funding.

However, the report indicates that a substantial deterioration of government debt metrics or increased external vulnerabilities would exert downward pressure on the rating, which underlines the risks of the government potentially missing its targets as general government debt is high compared to peers.

It may be noted in context of the high government debt levels that the government is committed to lower its debt to 50% of GDP by 2018. However, the medium-term fiscal path presented in the last budget can only be achieved if tight control is exercised on spending and there is a pick-up in economic growth. Accordingly, the risk of the government potentially missing its targets cannot be factored out.

The authorities also face a challenge in finding ways to protect the public finances from any spillover effects from the country’s financial sector. It may be noted that the island economy’s financial services sector has been under global security over the last two months as local financial services major Bramer Banking Corporation was declared bankrupt and taken over by the National Commercial Bank, while its parent group, insurance specialist BAI was found to be in thethroes of a Ponzi scheme upward of Rs 25 billion.

In conclusion, Moody’s expects monetary policy to remain in-line with the central bank’s objectives of price stability and balanced economic development. Moody’s notes that the island enjoys a stable political environment with well-established institutions and a tradition of coalition politics.

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