Country Report Mauritius September 2008

Outlook for 2008-09

• Despite tension between the reformist and traditionalist wings of the Labour Party, the Alliance sociale coalition government will remain in power over the forecast period and maintain the liberalising thrust of economic policy.
• The Economist Intelligence Unit forecasts real GDP growth of 5.8% in 2008 and 6% in 2009, driven by the continuing recovery of textile manufacturing and further growth in the services and seafood sectors.
• We expect inflation to begin to decline over the next few months. However, average inflation is forecast to rise to 10% in 2008, before declining to 6.7% in 2009, as world energy and food price inflation falls.
• The Mauritius rupee is likely to hold on to much of its appreciation until late 2008, when the US dollar should start to rise on world markets. We forecast an average exchange rate of MRs27.3:US$1 in 2008 and MRs29:US$1 in 2009.
• The current-account deficit is forecast to rise to 6.7% of GDP in 2008, owing to a worsening trade deficit, before falling to 5.4% of GDP in 2009, as continuing growth in tourism leads to a wider surplus on the services account.

Monthly review

• The minister of justice and leader of the Mouvement republicain, Rama Valayden, has been under pressure to resign over his alleged involvement in a drugs scandal.
• The leader of the opposition Mouvement militant mauricien (MMM), Paul Berenger, has faced disquiet within the party about its merger with the Mouvement militant socialiste mauricien.
• Mr Berenger has said that he still considers an electoral alliance between the MMM and the Mouvement socialiste militant to be possible.
• Members of the Monetary Policy Committee of the Bank of Mauritius, appointed by the minister of finance, Rama Sithanen, have opposed interest rate increases proposed by the bank’s governor, Rundheersing Bheenick.
• Mr Sithanen has warned against action that could threaten economic growth, and Mr Bheenick’s predecessor has criticised his allegedly inconsistent conduct of monetary policy.
• Annual inflation rose to 11.5% in July, a 20-month high, owing mainly to a 20% increase in fuel prices at the beginning of the month.
• The US House of Representatives has voted to extend to Mauritius the preferential access to the US clothing market enjoyed by least developed countries.
• The EU is to allow Mauritius to export a quota of tuna products derived from imported fish.