Population 1.297 million
GDP 11.93 US$ billion
@rating
country
Business climate
assessment
| 2010 | 2011 | 2012(e) | 2013(f) | |
|---|---|---|---|---|
|
GDP growth (%)
|
4.2 |
3.9 |
3.2 |
3.3 |
|
Inflation (yearly average) (%)
|
2.9 |
6.5 |
4.3 |
3.5 |
|
Budget balance (% GDP)
|
-3.2 |
-4.1 |
-4.6 |
-4.9 |
|
Current account balance (% GDP)
|
-2 |
-1.3 |
-10.6 |
-9.7 |
|
Public debt (% GDP)
|
57.0 |
57.0 |
63.0 |
62.0 |
| (e) Estimate (f) Forecast | ||||
STRENGTHS
- Well-established democracy
- Favourable business climate
- Solid banking system
- English/French bilingualism
- Strong tourist potential
WEAKNESSES
- Strong commercial and financial dependence on Europe
- Exports in euros and imports in dollars
- Deficient system of education and professional training
- State-controlled monopolies and subsidised prices in several sectors
- Continued ethnic division
Risk assessment
Growth expected to remain stable and moderate in 2013
The Mauritian economy is organised around three key sectors: tourism, textiles, sugar and finance. Most have been directly affected by the deepening European crisis. Tourism (8% of GDP), 65% of whose revenues come from European visitors, practically stagnated in 2012, and is expected to improve only slightly in 2013, thanks to the arrival of more tourists from emerging countries. The textile sector has also suffered from its geographic focus on Europe and a weak recovery is expected for 2013. The country will continue to suffer from the weakness of private investment, which is expected to adversely affect the construction and building sector. Sugar production is also expected to remain stagnant. Finally, the financial sectors are expected to continue to expand thanks to the government’s diversification policy.
Support for businesses, increased liberalisation of the economy
The economic reforms begun in 2012 are expected to continue in 2013. Pro-business reforms have been put in place, especially through direct aid to businesses in difficulty and through massive infrastructure investment. The government is also expected to act to improve the efficiency of the public sector and to support the poorest households thanks to the $35mn World Bank loan granted in mid-2012. The abolition of the solidarity tax on the highest incomes has also been decided. A rise in public sector wages will come into force in early 2013. The implementation of the “Economic Reconstruction and Competitiveness Programme” which runs until 2105 will continue. Its purpose is to limit vulnerability to economic conditions in Europe by increasing tourist facilities and supporting the development of SMEs in textiles, fishing and sugar production. The incentives, especially tax incentives, designed to encourage non-residents to acquire properties on the island (residence permit, 15% tax rate, absence of inheritance tax) will be maintained. Sovereign risk will therefore be moderate, the budget deficit remaining limited and national debt expected to stabilise at a sustainable level.
Current account deficit still very high, highly attractive for direct investment
The difficulties in the export markets (2/3 of them European) and the appreciation of the rupee against the euro strained the current account balance in 2012. It will remain very high in 2013 despite continued European economic improvement and the stagnation of energy prices (biggest import item). The opening in 2012 of a €600mn foreign currency credit facility will help the exporting sectors to refinance their borrowing. This current account deficit will continue to be funded by high direct investment inflows, especially in real estate and construction, mostly from South Africa, France and the United Kingdom. Asian investments are now higher than those from Europe and this diversification of investment sources will continue. Loans from the EU (via the European Development fund lasting until 2013) intended for the development of agricultural, educational and transport infrastructures will continue. Finally, deposits by non-residents attracted by the island’s role as a nerve centre for investments constitute an additional source of finance. This role, however, is dependent on tax treaties concluded between the island and several other countries, which is why, under pressure from the Indian government, Mauritius will gradually have to review its tax treaties with India, resulting potentially in necessary changes in the offshore financial landscape.
Political stability is expected to last
The resignation of the president (who holds an honorary position) in 2012, in disagreement with the pro-business economic policy conducted by the government of N. Rangoolam, shows that there is no general consensus in the country on the current reforms. However, it is unlikely that this will degenerate in 2013 into popular protest, social harmony being largely ensured (reduction of poverty, low unemployment, wage rises etc.). In 2013 the Prime Minister, who has a weak majority in Parliament, will remain under the threat of a vote of no-confidence. Nevertheless, the country still has one of the continent’s most effective governance systems by international institutional standards.
