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Mauritius Country Risk Report Q2 2016

Mauritius Country Risk Report Q2 2016

Core Views We forecast modest real GDP growth in Mauritius in 2016 and 2017, bolstered by falling oil prices, expansionary fiscal policy, and a recovery in investment. We forecast growth of 4.2% and 4.4% in 2016 and 2017, respectively, compared with 3.4% in 2015. Risks to political stability should be limited in the short-term, as the recently elected government overseas a period of accelerating economic activity. The government is set to put an emphasis on spurring economic growth ahead of fiscal consolidation, meaning an increase in the budget deficit is likely in the short term. This is unlikely to pose a serious threat to broader economic stability in itself, although higher deficits and rising public debt will leave the country more vulnerable to external shocks or shifts in investor sentiment.


Executive Summary
Core Views
Key Risks
Chapter 1: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
Large-Scale Infrastructure Projects To Boost Growth
Mauritius’ economic growth will accelerate over the coming years, boosted by large-scale public investment and economic
rapprochement with India and China. Nevertheless, real GDP growth will remain below the government's forecast of 5.3% for 2015/2016
and 5.7% for 2016/2017, as private investment remains relatively subdued.
TABLE: INCENTIVES FOR THE SMART CITY PROJECTS
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Fiscal Policy And Public Debt Outlook
Widening Deficits As Fiscal Policy Moves Expansionary
Mauritius' fiscal deficit will increase over the coming quarters, as the government pushes forward with its strategy to develop large-scale
infrastructure projects. This will be reinforced by the government continuing with its policy to increase tax breaks to support private
investment and domestic consumption. As a result, the government will miss its medium-term debt reduction target.
Structural Fiscal Position
TABLE: MAIN REVENUE & EXPENDITURE CATEGORIES
External Trade And Investment Outlook
Wide C/A Deficits On The Horizon
Mauritius' current account deficit will remain wide in 2016, as the
uptick in tourism receipts and exports is matched by a surge in imports, brought about by the implementation of large-scale
infrastructure projects by the government.
Outlook On External Position
TABLE: CAPITAL & FINANCIAL ACCOUNT BALANCE
TABLE: TOP 5 GOODS IMPORTS 2014
TABLE: TOP 5 GOODS EXPORTS 2015
Monetary Policy
Weak Global Outlook To Prompt Rate Cut In June
The Bank of Mauritius (BM) will remain dovish over 2016 and cut its policy rate by 25bps to 4.15%, in order to support economic activity
amid further uncertainties surrounding the global economy. Weak global commodity prices throughout 2016 will give BM space to
manoeuvre without worrying about inflation spiralling out of control.
Monetary Policy Framework
Chapter 2: 10-Year Forecast
The Mauritian Economy To 2025
Service Sector Drives Long-Term Growth
Real GDP growth in Mauritius will be driven by the development of service industries over the coming decade. This will be powered by
government investment into the key sectors of tourism, medical tourism, education, banking, and shipping services.
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 3: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
Increasing Economic Relations With China And India
Mauritius will increasingly look towards China and India for foreign direct investment over the coming years, as the government embarks
on large-scale infrastructure projects to support economic growth. Despite closer historical and cultural ties with India, China will likely
increase its influence faster than the latter, given that Beijing is already ahead in its investment strategy in Mauritius.
Chapter 4: BMI Global Macro Outlook
Global Macro Outlook
Tail Risks Mounting Amid Sub-Par Growth
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, 2015 AND 2016 (%)
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %
TABLE: MACROECONOMIC DATA & FORECASTS

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