Occasional paper No:

Economic update
October 2015

62

62

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Disclaimer
This publication has been prepared by MCB Group Limited (MCB Group) on behalf of itself, its subsidiaries and affiliated companies
solely for the information of clients of MCB Group, its subsidiaries and affiliated companies. While reasonable care has been taken to
ensure that the information contained therein is not untrue or misleading, MCB Group does not and will not (in any circumstances
whatsoever) assume any responsibility in relation to its correctness, completeness or accuracy and accordingly neither MCB Group nor
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or use of, this publication or its contents.

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PAGE

TABLE OF CONTENTS

Highlights

The global economy

The Mauritian economy

Figures
Figure 1:

IMF World Economic Outlook projections

Figure 2:

Main economic indicators

Figure 3:

Evolution of real GDP growth forecast for 2015

10

Box I:

Recent dynamics in global commodities, money and financial markets

Box II:

National income indicators in dollar terms

11

Box III:

Growth-related indicators

12

Box IV:

Analysis of Mauritius recent performance on the Global Competitiveness Index (GCI)

15

Boxes

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HIGHLIGHTS
World GDP growth is anticipated at 3.1% in 2015 and should recover modestly to 3.6% in 2016, with inflationary trends likely to remain
subdued. As regards our main market, the euro area is expected to show relatively improving economic conditions, albeit from a low base,
although the environment remains delicate, as gauged by unemployment staying generally high.
World inflation

World real GDP growth

Euro area unemployment

2016f)

2015(f)

2014(e)

2013

2016(f)

2015(f)

2013

2014(e)

2012

2011

2010

2009

2006

2.5
2.0
1.5
1.0
0.5
0.0
-0.5
-1.0
-1.5

2008

Annual % change

2016(f)

2015(f)

2014(e)

2013

2012

2011

2010

2009

2008

2007

2012

Euro area private consumer expenditure

13
12
11
10
9
8
7
6
2006

2011

2010

2016 (f)

2015 (f)

2013

Unemployment

2014 (e)

2012

2011

2010

2009

2008

2007

2006

2009

2008

2007

2007

2006

End of period consumer prices;

% change

% of total labour force

THE INTERNATIONAL CONTEXT

Real GDP growth for Mauritius is estimated at 3.4% in 2015 and is expected to stand at 4% in 2016. On another note, unemployment should
remain within relatively elevated territories, while challenges persist with regard to the countrys position on the external front. On the other
hand, it is worth highlighting that, as a source of satisfaction, headline inflation remains quite low.
Real GDP growth

Unemployment

10

9
%

Headline inflation

2016(f)

2015(f)

2013

2014(e)

2012

2011

2010

2009

2006

2016(f)

2015(f)

2014(e)

External front

12

100

15

10

80

12

Balance of visible trade deficit

Current account deficit as a % of GDP (right scale)

2016(f)

2015(f)

2014(e)

2013

2012

0
2011

2006

2016(f)

2015(f)

2014(e)

2013

2012

2011

2010

2009

2008

2007

2006

20
2010

40

(e) estimates (f) forecasts

2009

60

2008

2007

Rs bn

% of GDP

2013

2012

2011

2010

2009

2008

2007

6
2006

2008

2007

4
3

THE MAURITIAN ECONOMY

New methodology takes into account cross border transactions of GBC1s since January 2010
Sources: IMF, World Economic Outlook, October 2015, Statistics Mauritius, Bank of Mauritius, and MCB staff estimates

(e) estimates (f) forecasts

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THE GLOBAL ECONOMY
Figure 1

IMF World Economic Outlook projections

Percent change unless noted otherwise

Real GDP Growth
World Output
Advanced economies
United States
Euro area
Germany
France
United Kingdom
Emerging market and developing economies
Commonwealth of Independent States
Emerging and Developing Asia
China
India 1
Emerging and Developing Europe
Latin America and the Caribbean
MENA 2
Sub-Saharan Africa
Nigeria
South Africa
World Trade Volume (goods and services)

2012

2013

2014(e)

2015(f)

2016(f)

3.4
1.2
2.2
-0.8
0.6
0.2
0.7
5.2
3.4
6.8
7.7
5.1
1.3
3.1
5.0
4.3
4.3
2.2
2.9

3.3
1.1
1.5
-0.3
0.4
0.7
1.7
5.0
2.2
7.0
7.7
6.9
2.9
2.9
2.3
5.2
5.4
2.2
3.3

3.4
1.8
2.4
0.9
1.6
0.2
3.0
4.6
1.0
6.8
7.3
7.3
2.8
1.3
2.7
5.0
6.3
1.5
3.3

3.1
2.0
2.6
1.5
1.5
1.2
2.5
4.0
-2.7
6.5
6.8
7.3
3.0
-0.3
2.5
3.8
4.0
1.4
3.2

3.6
2.2
2.8
1.6
1.6
1.5
2.2
4.5
0.5
6.4
6.3
7.5
3.0
0.8
3.9
4.3
4.3
1.3
4.1

1.0
-10.0

-0.9
-1.2

-7.5
-4.0

-46.4
-16.9

-2.4
-5.1

2.0
6.0

1.4
5.8

1.4
5.1

0.3
5.6

1.2
5.1

0.7
0.6

0.4
0.2

0.3
0.2

0.4
0.0

1.2
0.0

Commodity prices (US dollars)

Oil 3
Nonfuel (average based on world commodity export weights)
Consumer prices
Advanced economies
Emerging market and developing economies
London Interbank Offered Rate (percent)
On US Dollar Deposits (6 month)
On Euro Deposits (3 month)
(e) estimates (f) forecasts
Note: Real effective exchange rates are assumed to remain constant at the levels prevailing during July 27August 24, 2015. Economies are listed
on the basis of economic size. The aggregated quarterly data are seasonally adjusted. Data for Lithuania are included in the euro area aggregates
but were excluded in the April 2015 World Economic Outlook (WEO).
1

For India, data and forecasts are presented on a fiscal year basis and GDP from 2011 onward is based on GDP at market prices with FY 2011/12
as a base year.
2

Including Afghanistan and Pakistan

Simple average of prices of UK Brent, Dubai Fateh and West Texas Intermediate crude oil. The average price of oil in US dollars a barrel was
USD 96.25 in 2014; the assumed price based on futures markets is USD 51.62 in 2015 and USD 50.36 in 2016.

Source: IMF, World Economic Outlook, October 2015

The global economic situation remains delicate, with the recovery suffering new setbacks and uncertainty
weighing heavily on the outlook, six years after the world came out of the Great Recession. Largely due to
weaker-than-envisaged global activity in the first semester, IMF sliced its growth projection for the world
economy by 20 basis points to 3.1% for this year. Key undertones of this headline figure relate to increasingly
diverging cross-country and region specific prospects. On the one hand, near-term growth is firming up in
advanced economies, albeit modestly. This primarily reflects a confluence of factors, including retreating crisis
legacies, stimulus from subdued international commodity prices and highly accommodative monetary
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conditions, as well as improving confidence and labour market conditions, even if deflationary pressures and
weak underlying productivity growth continue to exert strains on activity levels. On the other hand, emerging
market and developing economies, as a whole, should experience a growth slowdown for the fifth year in a
row, which is all the more worrying when taking note of the fact that they account for a bulging share of global
output and are the biggest contributor to world growth. In an environment already marked by weakening
world commodity prices, this group of countries is also bearing the brunt of structural bottlenecks, stiffer
external financial conditions, pressures on their currencies, a rebalancing in China and economic woes linked
to geopolitical factors. For 2016, whilst its forecast has been trimmed by 0.2 percentage point relative to its
July 2015 World Economic Outlook Update in light of lingering vulnerabilities and uncertainties, the IMF still
projects that global activity will strengthen moderately to snatch a 3.6% growth rate. This would likely hinge
on (i) a sturdier recovery of advanced economies as output gaps steadily narrow; and (ii) emerging market and
developing economies recovering on the back of spillovers from stronger activity in advanced economies, a
progressive return to trend growth rates in countries in economic distress in 2015 (including Brazil, Russia and
some countries in Latin America and the Middle East), which would outweigh the gradual Chinese growth
realignment. All in all, however, the distribution of risks to the medium-term outlook for the global economy
keeps on being largely tilted to the downside, with threats comprising protracted commodity market
rebalancing, low productivity levels, broad-based weaknesses in investment, lasting legacies of insufficient
demand, geopolitical tensions, as well as heightened financial market volatility and disruptive asset price
shifts.
Coming to Mauritius main markets of interest, a relatively more favourable environment in the euro area can
be noted. Indeed, recovery therein has slowly begun to gather pace, with the IMF forecasting growth to
increase from 0.9% in 2014 to 1.5% this year, and move up slightly to 1.6% in 2016. Despite disparate country
prospects across the single currency area, this pickup should be underpinned by lingeringly low oil prices,
monetary easing and the euro depreciation. The outlook is nonetheless marked by a series of downside risks,
including potentially renewed deflationary pressures, weak potential growth and a slowdown in total factor
productivity, the still-unfolding Greek debt woes, the refugee and migrant crisis, as well as unfavourable
demographic dynamics. For its part, despite its generally appreciable fundamentals and ongoing policy
reforms, sub-Saharan Africa, which features as a prime target by Mauritius Inc. to widen and diversify its
economic space, is anticipated to post slower growth this year at 3.8%, although it is worth noting that this
growth rate is significantly higher upon excluding South Africa. The end of the commodity boom, waning
demand from slowing China the regions biggest single trading partner as well as tightening financial
conditions for the continents frontier markets underscore this growth deceleration. Thereafter, the regions
outlook is forecast to mend in 2016, with growth standing at 4.3%, buttressed inter alia by a moderate rise in
external demand linked to an anticipated strengthening of the global recovery, an expected progressive pickup
in oil prices benefiting net exporting economies and better prospects for Ebola-afflicted countries across
Africa.
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Box I: Recent dynamics in global commodities, money and financial markets
Implications of lower international commodity prices

Commodity price indices, monthly

Prices of several commodities dropped sharply in 2015, owing to ample supplies and

155

weak global economic activity. According to World Bank estimates, non-energy

135

metals dropping by 18% and 5% respectively over this period. For its part, the price
of crude brent oil, which registered an above 55% drop between June 2014 and
January 2015, modestly rebounded before again falling in recent months to stand at
around USD 48 currently, on account of demand shocks and an oil production glut.
Over the medium term, oil prices are projected to increase gradually but remain
generally subdued, whilst non-fuel commodity prices should stabilise at lower levels.
Declining commodity prices acted as a shot in the arm for importing countries, and
particularly affected exporting emerging market and developing economies.
Notably, in sub-Saharan Africa, where the combined share of energy and minerals
and metals accounting for about two-thirds of the regions exports, several oil-

Index (Jan 2010=100)

commodities fell by 20% since June 2014, with prices of agriculture and precious

115

95

75

55
Sep-10

Sep-11

Sep-12

Energy

Sep-13

Non-energy

Sep-14

Sep-15

Precious Metals

Note:
Energy constitutes crude oil (85%), natural gas (11%) and coal (4%);
Non-energy is mainly comprised of agriculture (65%)

exporting countries experienced major setbacks to growth.

Escalating risks to global financial market conditions

In a context characterised by lingering uncertainties about the global recovery,
volatility risks are being observed as international financial markets are bracing up to

Triad of financial turbulences

(EM credit, China leverage and US QE)

the forthcoming interest rate lift-offs from the zero lower bound in the UK and the
US. Of note, the IMF advised the Federal Reserve to hold off its first increase in policy
rate since June 2006 at least till the first half of 2016, until signs of wage or price
inflation are firmer than being currently perceptible. On the other hand, other
countries are boosting monetary stimulus, hence heightening risks of asynchronous

In the illustration below, the EM marked with an

arrow are the most structurally exposed to a triple
unwind, and could potentially inflect into a weaker

channel of growth.

monetary policy environments. Particularly, in the euro area, the Governing Council
Unwinding China leverage
(Hurting EM current accounts)

of the European Central Bank, which is holding its regular monetary policy meeting
this week, is expected to contemplate an expansion of the Quantitative Easing (QE)

Taiwan

programme. At another level, the surprise Chinese Yuan devaluations last August
sent fresh shockwaves through global markets, with stock and resource prices

Chile
Peru

tumbling as investors viewed these moves as vivid signals of slowing Chinese growth.

Colombia
Malaysia
Indonesia

In addition, Chinas competitors, especially in Emerging Markets (EM), feared a loss

China

South Africa

of competitiveness and an inflow of cheaper Chinese exports, which drove down

Brazil

their import prices and in effect ignited disinflationary pressures. As a result, several
Russia

central banks followed suit and triggered a fresh round of competitive devaluations.
All in all, looking ahead, the IMF expressed concerns about financial risks increasingly
rotating to emerging markets, which would dampen the latters capacity to

withstand shocks associated with the potential threats of a further strengthening US

dollar and interest rate normalisation, more volatile capital flows and Chinas
slowdown. Should all three unwinds occur simultaneously, Brazil, South Africa and

Mexico
Poland

Thailand
India

Unwinding EM domestic credit

(Hurting EM growth directly)

Unwinding US QE via higher real

rates, dollar strength
(Hurting EM capital accounts)

Indonesia will most severely be hit, as depicted in the adjacent diagram.

Sources: IMF World Economic Outlook October 2015, IMF Global Financial Stability Report October 2015, World Bank Commodities Market Outlook July 2015,
Morgan Stanley Research

62
THE MAURITIAN ECONOMY
Figure 2

Main economic indicators

Unit

2011

2012

2013

GDPmp

Rs bn

323

344

Per capita GDP

USD

8,975

GDP growth (at market prices)

GDP growth (at basic prices)

(1)

(2)

2014

2015

366

387

408

9,134

9,483

10,013

9,200

3.9

3.2

3.2

3.6

3.4

3.6

3.4

3.2

3.5

3.4

GDS

% GDP

13.1

12.7

11.8

11.6

12.0

GDFCF

% GDP

24.0

23.0

21.2

19.1

18.1

Headline inflation

Dec, %

6.5

3.9

3.5

3.2

1.7

Budget deficit

% GDP

3.2

1.8

3.5

3.2

3.8*

Public sector debt (for the purpose of debt ceiling)

% GDP

53.1

52.1

53.9

54.2

55.5

Rs bn

74.2

81.3

77.5

76.8

79.3

% GDP

13.8

7.3

6.3

5.5

5.4

Rs bn

+5.2

+6.0

+16.6

+23.0

+14.3

average, %

7.8

8.0

8.0

7.8

8.0

Balance of visible trade deficit

Current account deficit
Overall balance of payments
Unemployment rate
(1) Revised estimates

(2) MCB revised forecasts

* In light of the shift from a calendar year to a fiscal year basis for budgetary reporting purposes, the figure relates to the January to June 2015 period, with the
forecast for FY 2015/16 being 3.5%.

Sources: Statistics Mauritius, Ministry of Finance & Economic Development, Bank of Mauritius & MCB staff estimates

Updated forecasts for 2015

Economic growth
It is comforting to note that macroeconomic priorities have been taking a more central place in the domestic
public discourse recently. Whilst not dismissive of headway being made to lay framework conditions with a
view to achieving and harnessing a nascent economic momentum, the Mauritian economy would remain in a
challenging zone in 2015. In fact, our latest outlook features a downgrade of our earlier growth prognosis,
partly linked to the notable worsening of our investment projections. Thus, economic growth based on GDP
at market prices, in line with international national accounting conventions is anticipated to stand at 3.4%
this year. This marginally undershoots the most recent forecast of Statistics Mauritius, which has been revised
downward to 3.5%, whilst being above the IMF forecast of 3.2%. In particular, growth would be marred by
another noticeable downturn in private sector investment and unfavourable outcomes posted by specific
sectors, which can principally be explained by the persistence of supply-side constraints as well as the
countrys vulnerability to the worsening global growth outturn and related economic uncertainty levels.
Additionally, activity levels would be affected by the restrained, albeit positive, growth foreseen at the level of
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62
public sector investment. Overall, in keeping with recent trends, the growth forecast for 2015 translates into
yet another sub-par performance for the country, which needs to be promptly reversed in order to lay solid
foundations for full gear wealth and job creation in view of our objective of achieving durable and inclusive
growth. Against the backdrop of the countrys growth performance, GDP at market prices is forecast to grow
from Rs 387 billion in 2014 to Rs 408 billion in 2015. Subsequently, per capita GDP in rupee terms should chalk
a 5.3% nominal increase to attain some Rs 323,000. However, per capita GDP denominated in US dollars
should drift downwards, when assessed relative to the preceding year, to revolve at USD 9,200, after making
allowance for the marked strengthening of the greenback on international markets.

Evolution of real GDP growth forecast for 2015

Figure 3

(Figures are at market prices unless otherwise stated)

Forecast as at

Statistics Mauritius
(Official figures)

Bank of Mauritius*

IMF

MCB

Oct 14
Nov 14
Dec 14
Jan 15
Feb 15
Mar 15
Apr 15
May 15
Jun 15
Jul 15
Aug 15
Sep 15
Oct 15

3.9
3.6
3.5
-

4.3
3.7
-

3.9
3.5
3.2

3.8
3.8
3.8
3.6
3.4

* Figures are at basic prices

Sources: Statistics Mauritius, Bank of Mauritius (Minutes of Monetary Policy Committee meetings), IMF & MCB staff estimates

Sources: Statistics Mauritius, Bank of Mauritius (Minutes of Monetary Policy Committee meetings), IMF & MCB staff estimates

As mentioned, our growth outlook reflects a still bridled national investment climate. Firstly, public sector
investment is expected to register a lower-than-previously-anticipated growth due to project implementation
lead times affecting large-scale ventures. Secondly, private sector investment should contract, for the fourth
consecutive year, against the backdrop of economic difficulties and uncertainties, mainly attributable to a
notable dip in non-residential fixed capital formation, which has an important bearing on the countrys
productive capacity and job creation. All in all, the combination of these trends should cause the GDFCF to
GDP ratio to yet again decline this year to reach 18.1% for the first time in more than three decades.
Nonetheless, in view of the still-low domestic savings rate, the resource gap remains a cause for concern in
light of the countrys investment aspirations, thus implying continued reliance on foreign saving. At another
level, it is worth pointing out that the anaemic investment pattern should contribute to the worsening of
nationwide unemployment by 20 basis points to reach 8.0% in 2015. Beyond this number, an assessment of
the core dynamics at play shines light on persistent related trends which offer disquieting insights. Indeed,
labour statistics for the second quarter of 2015 indicate that: (i) 43% of the unemployed were aged below 25
years; (ii) 32% of the unemployed have been looking for work for a year or more; (iii) the overall joblessness
rate for women attained 11.9%, with the indicator reaching 30.4% for the 16-24 age group; and (iv) the
national participation rate lingered at 60.8%, with the female activity rate being even more worrying at 47.3%.
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Box II: National income indicators in dollar terms
National income identity
GDP at market prices = Final Consumption Expenditure + Gross Domestic Fixed Capital Formation +
Government Expenditure + Net exports of goods & services
+ Net primary income from rest of the world + Net transfers from rest of the world
= Gross Domestic National Disposable Income

Evolution of key indicators in dollar terms

Per capita GDP
12,000

25

11,000
10,000

20

USD

Current International Dollar bn

GDP in PPP terms

9,000
8,000

15

7,000
6,000

10
2011

2012

2013

2014(e)

2015(f)

2011

2012

2013

2014(e)

2015(f)

Using latest available figures from IMF, it can be observed that GDP at market prices, measured in current international dollars
and in PPP terms, has risen over the past few years. However, GDP per capita contracted by around 8% to reach USD 9,200 in
2015, after catering for the estimated sizeable firming up of the greenback against the rupee.

Net exports of goods & services

Net flows from rest of the world

300

1000
800

200

400

USD m

USD m

600

200

100
0

0
-200

-100

-400
2011

2012

2013

2014(e)

2011

2015(f)

Net primary income from rest of the world (incl. GBC)

2012

2013

Exports of goods & services

Net transfers from rest of the world (incl. GBC)

2014(e)

2015(f)

Imports of goods & services

Net exports of goods & services

The impact of trends characterising the USD can be fittingly evaluated by scrutinising indicators capturing the countrys
transactions on the international scene. Notably, whilst the movement of such metrics should be carefully appraised on account
of their volatile nature partly linked to the evolution of flows associated with Global Business Companies the net primary
income and net transfer from rest of the world fell in 2015 when computed in USD and making allowance for the latters
strengthening. Besides, this situation contributed to the negative USD figure for net exports becoming less prominent in 2015.
(e) estimates (f) forecasts

Sources: IMF, Statistics Mauritius & MCB Staff estimates

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62

Box III: Growth-related indicators

Contribution of expenditure to economic growth
8

In 2015, private investment is, for the fourth

consecutive year, anticipated to cast a

4
2

% points

negative impact on the economys expansion.

Indeed, it is expected to rub off some 70 basis

0
-2

points out of real GDP growth.

-4
-6
2011

2012

2013

2014(e)

2015(f)

Public investment

Private investment

Net exports of goods & services

Inventories (incl. statistical discrepancies)

Consumption

Investment & Savings

25

of total investment to GDP pursued a marked

downtrend over the years. In spite of this

% of GDP

Reflecting the soft economic climate, the share

evolution, the countrys resource gap has

20

15
10

remained relatively wide over time.

5
2011

2012

2013

GDS

2014(e)

2015(f)

GDFCF

Consumption expenditure
100

consumption expenditure to national output

% of GDP

80

On the other hand, the ratio of final

60

40

has stayed generally elevated

20
0

2011

2012

2013

General Government

2014(e)

2015(f)

Households

Net exports of goods & services

while net exports of goods and services

have exerted lower strains on GDP over time.

% of GDP

-10
-11
-12
-13
-14
2011

2012

2013

2014(e)

2015(f)

(e) estimates (f) forecasts

Source: Statistics Mauritius

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62
From a sectorial standpoint, mixed outcomes are being contemplated in respect of value added generated.
Specifically, tourism is anticipated to record a circumstantially appreciable growth performance in 2015, on
account of ongoing trends which point towards sustained increases in tourist arrivals building up on the
corresponding year-on-year increase of 10.8% recorded for the period January September 2015. The sector
will, in all likelihood, leverage on the payoffs of sustainable efforts towards ensuring the continuous
diversification of markets and refinement of value propositions, even though it should be highlighted that the
trajectory of gross receipts would likely be contained, partly due to dampened income evolution in key source
markets. Moreover, the business and financial services as well as the ICT industries should uphold their
noteworthy expansionary tempo yet again this year, propped up by sound fundamentals and sustained sector
deepening. For its part, growth should remain quite strong in the seafood industry this year, supported by
market access inroads and capacity-building investments, despite some ascending stresses originating from
newly implemented increases in European tariff quotas for the latters imports of selected fishery products
which would tend to benefit competitor countries, such as Philippines and Thailand. From a less favourable
perspective, the performances of other sectors are expected to stay in relatively challenging waters. In
particular, despite a much-weakened base effect, construction is forecast to contract in 2015 for the fifth
consecutive year, largely due to declining private sector investment and the tempered growth in public sector
spending. Elsewhere, the sugar sector should post an adverse performance this year, on the back of (i) a
slower sugar extraction rate notably linked to unfavourable climatic conditions, with sugar production
expected to fall marginally from 401,000 in 2014 to 390,000 tonnes as per latest estimates from the Crop
Estimate Coordinating Committee; and (ii) the reorientation of its productive activities. As for the textile
industry, expansion in value added is forecast to be modest this year owing to the still-delicate economic
climate prevailing in our key export markets, even if operators would reap the positive offshoots from
enhanced market access beyond established spheres, as well as productive efficiency gains. Furthermore,
despite new initiatives launched by the authorities to foster the development of Small and Medium
Enterprises, the performance of the domestic oriented industry is likely to remain subdued this year due to the
soft economic landscape, which should also contribute to a somewhat restrained growth outcome for the
trade sector.
Other indicators
One bright spot for the Mauritian economy comes from moderating inflationary pressures. In fact, after
standing at 3.9% a year earlier, headline inflation pursued a downward trend to attain 1.2% in September
2015. This largely reflects (i) weakened oil and commodity prices on the global front, albeit not fully passed
through; and (ii) subdued domestic demand and the relative declines in transport and telecommunication
prices locally. In the months ahead, inflation would resume a gradual uptrend, partly linked to the increasingly
prominent statistical impact of recent past increases in the consumer price index, but is still expected to stay
13

62
relatively low at 1.7% as at December 2015 on the back of the soft commodity prices and economic conditions.
Against this backdrop of relatively subdued inflationary pressures and bearing in mind the delicate economic
context, it can be noted that the successive meetings of the Monetary Policy Committee of the Bank of
Mauritius have left the benchmark Key Repo Rate unaltered. Regarding public finances, in spite of lower-thanexpected Government capital expenditure, the countrys fiscal position should continue to warrant close
monitoring, with the budget deficit remaining relatively elevated in 2015, thus exerting pressures on the public
debt. Already, the public debt has risen from 60.7% in 2014 to 63.4% in June 2015 based on the international
definition, while increasing from 54.2% in 2014 to 56% of GDP in June 2015, when computed for the purpose
of the statutory ceiling. There is thus a vital need, in the short- to medium-term, to be particularly careful
regarding the structure of financing of public sector projects. On the external front, notwithstanding notable
headway harnessed regarding diversification of export markets, the still testing economic context
characterising our key trading partners, the relative weakness of the euro on international markets and
inherent structural weaknesses on the local front should continue to contribute in keeping external
imbalances at generally elevated levels. The balance of trade is forecast to stay high and attain around Rs 79
billion this year, despite benefiting from the relief instilled to the import bill for petroleum and food products
in the wake of declining international commodity prices. All in all, such dynamics should lead to a relatively
wide current account deficit of around 5.4% of GDP in 2015. This imbalance is likely to be more than
compensated for by capital inflows even if the latters exact magnitude is difficult to figure out given the
inherent volatility of cross border transactions of global business companies (GBCs) and the impact of net
errors and omissions leading to another surplus position on the countrys balance of payments.
Nevertheless, this positive outcome should not mask the precariousness of our external balances in light of the
countrys vulnerability to external shocks in the event of unforeseen outflows brought about by sudden shifts
in investor sentiment.

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Box IV: Analysis of Mauritius recent performance on the Global Competitiveness Index (GCI)
Even if the country retains its leading position as the most competitive economy in Africa in the GCI 2015-2016 rankings, the
report highlights that the decade-long improvement of Mauritius comes to a halt this year with a fall of seven places to 46th.
Small improvements in the basic factors for competitiveness institutions (34th, up one), infrastructure (37th, up five), and higher
education (52, up two) are offset by declines in the efficiency of labor (down by five places to 57th) and the financial market (down
by eight places to 34th) However, as the country transitions moves up the development ladder, more needs to be done to unlock
the areas of competitiveness conducive to a knowledge-driven economy: higher education, especially its quality; the use of ICTs
and ability to absorb new technologies (65th), where it has steadily declined over the past decade; the capacity to innovate, about
which business leaders are particularly concerned; and an inadequately educated workforce. Of note, over and above the aforementioned changes in the countrys rankings, it is important to probe further into the granular evolution of our scores along the
pillars of competitiveness, relative to the best and worst performers worldwide for informed analysis and policy-making towards
effectively addressing such deficiencies.
7

*
Score (1-7)

Best performer
4

Mauritius
Worst performer

Pillar

2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014

The urgency to promptly tackle the above-mentioned competitiveness hindrances is all the more amplified in order to timely
meet Mauritius aspirations for an elevated growth path, given the strong positive link existing between a countrys GDP per
capita and its competitiveness score. The latter acts as a good proxy for productivity and as such, fundamentally shaping the
medium to long-run growth rate of an economy and its level of prosperity, as depicted in the below diagram.

GDP per capita, PPP (2015), USD'000

140
120
100
80
60
40
20

Mauritius
0
1

*GCI score: 1=worst; 7=best

GCI 2015-16 score (1-7)*

Sources: World Economic Forum Global Competitiveness Indices and IMF World Economic Outlook October 2015 database

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The way forward
In view of pressures exerted on its real, fiscal and external sectors, it is essential for Mauritius Inc. to address
its supply-side bottlenecks to create and nurture a strong and dependable foothold that will pave the way for
high, sustainable and inclusive growth. In this respect, while it is comforting to take note of large-scale projects
announced by the authorities, the rejuvenation of national investment levels, coupled with the timely and
consistent execution of other structural reforms, is a sine qua non condition for uplifting the economys longterm potential growth rate to beyond the 5% mark, thence helping the country to preserve and enhance its
social gains. As for 2016, notwithstanding the cumulative statistical effect of several years of sub-par growth,
our preliminary view is that real GDP growth would, as per our baseline scenario, attain 4%, which is slightly
above the latest forecast of 3.8% by the IMF. While factoring in the gradual healing of the global economy,
particularly in some of our key export markets, and the upturn in national investment levels, our outlook
reflects expected lead times for investment projects to be put into place and associated leakages, bearing in
mind that the import content is usually quite prominent at the inception phase of such ventures. That said,
economic growth will be underpinned by the projected double-digit expansion in public investment amidst
announcements made by the Government to extensively and opportunely bolster the infrastructure set-up,
with focus laid on the new road decongestion programme, the restructuring and extension of the port, as well
as the upgrading of water and electricity distribution and the telecommunications network. Besides, domestic
activity levels would benefit from a moderate recovery in private investment, aided by the kick-starting of
some sizeable projects and policy measures earmarked by the authorities to expedite the execution of
ventures and generate a more business-friendly trade and investment framework. In another respect, it can be
highlighted that, relative to our baseline growth forecast, downside risks remain on the cards, with Mauritius
being faced with the possibility, albeit with a low probability, of weaker-than-projected growth being realised
next year in the event of global shocks and material delays in the execution of contemplated investment
projects. However, the distribution of risks to our baseline growth prognosis is slightly tilted to the upside.
Noticeably, there is a moderate probability of real GDP growth moving up to a higher level if (i) a more
significant recovery is posted by our key export markets; (ii) earmarked infrastructure-enhancing undertakings
are executed at an accelerated pace; and (iii) the prompt implementation of structural reforms plays a more
catalytic role in unlocking and re-energising private sector investment.

J. Gilbert Gnany
Chief Strategy Officer

October 22, 2015

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Sources
Bank of Mauritius, Minutes of Monetary Policy Committee Meetings, Financial Stability Report, August
2015, Inflation Expectations Survey, August 2015 & Various Publications
European Commission, Various Publications
Eurostat, Quarterly National Accounts
IMF, Article IV Consultation Reports for Mauritius
IMF Blog, Various articles
IMF, Global Financial Stability Report, October 2015
IMF, Global Policy Agenda, October 2015
IMF, World Economic Outlook Online database
Morgan Stanley Research, July 2015
MCB Focus, Previous issues
Ministry of Finance & Economic Development, National Budget Speech 2015, Public Sector Investment
Programme Jan-June 2015/16 - 2019/20, Various Other Publications and Pronouncements
Selected Internet and Newspaper Articles
Statistics Mauritius, National Accounts Estimates, Population and Vital Statistics, Labour Force,
Employment and Unemployment, International Travel and Tourism, Exports and Imports Price Indices &
Various Publications
World Bank, Africa Pulse, October 2015
World Bank, Commodities Price Data (The Pink Sheet), October 2015
World Economic Forum, The Global Competitiveness Index 2014-2015 and 2015-2016

MCB Strategy, Research & Development, Staff Estimates

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