The growth outlook for Mauritius, which is forecast between 5,3% and 5,5% in 2004, is more positive than the outlook for global growth, Standard Bank noted in a research brief on the country on Thursday.
The bank noted the International Monetary Fund (IMF) forecast that the global economy is expected to grow by 4,6% in 2004 and by 4,4% in 2005, after growing by 3,9% in 2003 and 3% in 2002, while Africa is expected to grow by 4,2% and 5,5% in 2004 and 2005 respectively.
“The Mauritian economy’s growth outlook is equally positive. This is above the average world growth forecasts and is cause for optimism. Despite the many obstacles it faces, such as a small domestic market, remoteness, dependence on a few primary commodities for exports, and others, Mauritius has been one of the very few sub-Saharan African states to have performed well economically,” Standard Bank economist and author of the brief Jan Duvenage said.
According to the IMF, between 1998 and 2002 the manufacturing sector grew at an annual average rate of 4,6%. The sector is the largest contributor to the gross domestic product (GDP) — its contribution is recorded at 23%.
The island’s Central Statistics Office (CSO) expects the export processing zone (EPZ) to continue decelerating and contract by 2% in 2004.
“The robust global economic recovery could underpin growth, particularly in the EPZ and tourism sectors, as they are more dependent on global conditions. The volatile sugar sector will also boost growth and the CSO expects growth of over 15% this year,” Duvenage said.
“As no single sector dominates the economy [none makes more than a 25% contribution to the GDP], a broad-based growth recovery is more likely. High unemployment, however, remains a cause of concern,” he added.
According to the Bank of Mauritius, inflation was 3,9% year-on-year (y/y) in May, the lowest this year. Inflation averaged 4,2% y/y in February and 4,3% y/y in March and April while it averaged 3,9% in 2003 and 6,4% in 2002.
Duvenage noted that food inflation, amounting to 6% in May, remains relatively high on a year-on-year basis. In April it was recorded at 7,3% from 7,2% in March. The food component comprises 29,9% of the overall inflation index and thus has a significant impact on the inflation rate.
The increase in the crude oil price has not yet fully been accounted for in the index and is expected to push transport prices higher. Housing, water, electricity and gas prices, weighted at 9,6%, increased by 1,7% y/y in May compared with 1,8% y/y in April, 1,7% y/y in March and 1,8% y/y in February.
“Inflation has moved in a relatively narrow band and the highest rate since 2000 recorded was 7,3% y/y in April 2002. The IMF forecasts inflation of 5% in 2004 and 4,5% in 2005. The BOM expects inflation to average 4% in fiscal 2003/04 and a similar rate for calendar year 2004,” Duvenage said.
He added that the BOM is expected to maintain a fairly strict monetary policy stance to contain inflationary pressures and inflationary expectations. Interest rates, which are at their lowest in years, could be near the bottom of the interest-rate cycle, but are seen remaining low for the rest of 2004. However, expectations of interest-rate increases in the United States could add some upward pressure to domestic rates.
“Although the country imports more goods than it exports, this deficit has been more than offset by large inflows from the services, income and transfer account, but mostly from the services account. Hence, the current account of the balance of payments has improved from a deficit in 2000 to a surplus in 2003,” Duvenage said.
The country has capitalised on the US African Growth and Opportunity Act (Agoa) to improve its exports of textiles and apparel. In 2002 these exports amounted to $254,7-million, of which $106,5-million (or 42%) was under Agoa. This ratio rose to 50% in 2003, when total apparel and textile exports amounted to $269,2-million with $135,2-million under Agoa. — I-Net Bridge