Country Report Mauritius February 2011

Highlights

Outlook for 2011-12

  • With a large majority in the National Assembly, the government coalition, headed by Navin Ramgoolam, the leader of the Labour Party, is secure in office.
  • The main issue on the political agenda will be constitutional and electoral reform, which offers fertile ground for political controversy.
  • The focus of economic policy, apart from the prudent management of public expenditure, will be on developing and supporting the economy during a period of economic uncertainty in Europe, Mauritius's main export market.
  • In the longer term the government wants to reduce the economy's dependence on the slow-growing developed world and increase its links with the fast-growing developing economies.
  • Real GDP growth in Mauritius is forecast to fall from an estimated 4% in 2010 to 3.7-3.9% in 2011-12 as the economic recovery slows in Europe and the US-the destination of more than 70% of Mauritius's exports.
  • The current-account deficit is forecast to rise from an estimated 8.8% of GDP in 2010 to 10% of GDP in 2011 as the trade deficit widens, before falling to 9.5% of GDP in 2012 owing to the increasing surplus on the services account.

Monthly review

  • The defection of 11 senior members of the Union nationale (UN) to the Mouvement socialiste militant will probably lead to the UN's demise.
  • The murder of an Irish tourist on honeymoon in Mauritius has sent shockwaves through the island, raising questions about tourist safety and leading to calls for the return of the death penalty.
  • According to the 2011 Index of Economic Freedom, Mauritius enjoys greater economic freedom than any other Sub-Saharan country and ranks 12th in the world, ahead of the UK.
  • Annual inflation rose from 3.9% in November to 6.1% in December and 6.4% in January, following the rise in world oil and food prices.
  • Tourist arrivals grew by 10.7% in December, bringing total annual growth to 7.3%; the government hopes that arrivals will top 1m in 2011.
  • Sugar production fell by 3.1% in 2010 and may fall further in 2011 as growing conditions are worse than in 2010 and acreage appears to be declining.
  • The government is considering building a US$2bn oil refinery, to enter production in 2015; environmental groups have expressed concern.
  • Mauritius and China have signed a US$9m economic and trade co-operation agreement; two-thirds of the money, to be spent on as-yet-unspecified projects, will be in the form of grants.

Outlook for 2011-12: Political stability

The government coalition, Alliance de l'avenir, which consists of the Labour Party (with 30 seats in the National Assembly) and its junior partners, Mouvement socialiste militant (MSM; 12 seats), Parti mauricien social-démocrate (three seats) and Mouvement rodriguais (two seats), will be secure in office throughout the forecast period. Commanding 47 of the 69 seats in the National Assembly, the government even has the two-thirds majority required to amend the constitution. The alliance agreement between the Labour Party and the MSM mandated that the latter party's leader, Pravind Jugnauth, should serve as finance minister under the continued prime ministership of the Labour leader, Navin Ramgoolam. Mr Jugnauth, who was finance minister in the 2000-05 coalition government and in opposition in 2005-10, will see a successful stint as finance minister as preparation for becoming prime minister, like his father, Sir Anerood Jugnauth, the current president, who was prime minister for 16 years.

The prospect of another five years in opposition is likely to test the unity of the Mouvement militant mauricien (MMM), and in particular the position of its leader, Paul Bérenger, whose autocratic leadership of the party he founded in 1970 has caused the departure of several senior members in recent years. The collapse of the MMM's ally in opposition, Union nationale, with the defection of many of its leading members to the MSM, will increase the pressure on Mr Bérenger.

The main issue on the political agenda will be electoral and constitutional reform. The changes being contemplated include the introduction of some form of proportional representation; amending the Best Loser System, by which additional members of parliament are appointed to increase the representation of ethnic-religious minorities in the National Assembly; establishing a Senate; and increasing the powers of the president. These are all potential grounds for political controversy. In particular, some members of ethnic-religious minorities resent the domination of the political system by the Hindu majority and are reluctant to see the Best Loser System abandoned.

Outlook for 2011-12: Election watch

The next general election is due in 2015. Mr Ramgoolam will then be 68 years old and will have been prime minister for 15 of the previous 20 years; he will also have led the Labour Party for 24 years. Speculation has already begun in the Mauritian press about the political alliances that will compete in 2015. One possible scenario is that Mr Ramgoolam, contemplating retirement around the age of 70 (part way through the next parliament) and seeking to thwart the MSM leader's ambition of becoming prime minister, will drop the alliance with the MSM in favour of one with the MMM under a new leader. The alternative-continuing the Labour-MSM alliance-would put the coalition under strain, given Mr Jugnauth's prime-ministerial ambition and the lack of an obvious successor to Mr Ramgoolam as Labour leader.

Outlook for 2011-12: International relations

The main aims of Mauritius's foreign policy are to negotiate favourable access to developed markets for its exports, to encourage foreign investment and to cultivate economic relationships. As part of the Common Market for Eastern and Southern Africa, Mauritius is negotiating an economic partnership agreement (EPA) with the EU and will continue to receive financial assistance from the EU for restructuring the sugar sector and other development projects. An EPA being negotiated with India will consolidate the two countries' close relations, although their double-taxation agreement, dating back to 1982, is likely to be amended and this could cost Mauritius many of the advantages that it offers to investors in India. The relationship between Mauritius and China is deepening: Mauritius is to be the site of one of China's economic and trade co-operation zones in Africa. Relations with the British government are overshadowed by its refusal to recognise Mauritian sovereignty over the Chagos Islands and to allow the expelled Chagossians to return. Although Mauritian politicians will denounce British policy in this matter, economic and cultural relations between the two countries will remain close.

Outlook for 2011-12: Policy trends

The government, which entered office in 2010, will continue the liberalising policies of the previous administration, although the pace of reform will be slower and it will seek to appear less favourable to private enterprise and more favourable to the poor. The government will continue efforts to diversify the country's "four-pillar" economy, based on sugar, textiles, tourism and financial services, to increase its resilience to shocks and its competitiveness. Investment in education and infrastructure is vital if the shift towards a more services-oriented economy-especially the development of Mauritius as a regional centre for information and communications technology-is to succeed. Another element of economic strategy is the further development of fishing and tourism. The restructuring of the sugar sector-a large employer-will continue. However, policy will focus mainly on measures to support the economy following the debt crisis in the euro area. In particular, the government will continue its Economic Reconstruction and Competitiveness Programme (ERCP), a five-year scheme begun in 2010, one of the main aims of which is to promote diversification in the tourism sector and the expansion of small and medium-sized enterprises in the textile and sugar industries. In the longer term the government wants to reduce the economy's dependence on the slow-growing developed world and increase its links with the fast-growing developing economies.

Outlook for 2011-12: Fiscal policy

In the 2011 budget, presented to the National Assembly in November, the minister of finance, Mr Jugnauth, said that the government remained committed to the high levels of spending and investment that it had promised after the May election and set out in the ERCP. He announced a number of tax increases to support this level of spending, although some unpopular taxes were dropped. Based on an assumption of 4.2% real GDP growth in 2011, revenue is projected to grow by 11.7%, with tax revenue, which accounts for 85% of total revenue, growing slightly more quickly. Current expenditure is projected to increase by 7% to MRs72.6bn (US$2.3bn) and capital expenditure by 36% to MRs11.4bn, raising overall projected expenditure by 10.2%. The budget projects a fiscal deficit of 4.3% of GDP in 2011. The Economist Intelligence Unit, with a lower assumption of real GDP growth in 2011 (3.7%) than in Mr Jugnauth's budget, forecasts lower overall revenue in 2011. However, we expect the government to trim its expenditure in 2011 (to match its weaker revenue and to reduce the fiscal deficit, if only slightly), and forecast a deficit of 4.6% of GDP.

The situation will be similar in 2012, for which the Ministry of Finance and Economic Development assumes real GDP growth of 4.3%, whereas we forecast 3.9% growth. However, as we forecast a sharper upturn in real GDP growth in 2012 than does the government, we expect a higher growth rate for revenue and expenditure. We forecast a fiscal deficit of 4.5% of GDP in 2012, fractionally lower than the previous year but still above the government's projection of 4.1%. The deficits will be financed by a balance of domestic and external borrowing, and we expect public debt to rise steadily from an estimated 63% of GDP in 2010 to 66% of GDP by the end of 2012.

Outlook for 2011-12: Monetary policy

In September 2010 the Bank of Mauritius, the central bank, cut the repurchase (repo) rate from 5.75% to 4.75%-the first interest-rate change since March 2009. The bank had hesitated over taking such decisive action because of fears about the impact on inflation. However, in September it believed-wrongly, as it turned out-that inflation would remain below trend for some time and decided to loosen monetary policy to try to stimulate economic growth. Although at its meeting in December the bank's monetary policy committee forecast 7% annual inflation in June 2011, it decided to keep the repo rate at 4.75% owing to the uncertain global economic prospects and the consequent risks for Mauritius. We expect interest rates to remain stable in 2011, before following the global trend and rising in 2012.

Outlook for 2011-12: International assumptions

International assumptions summary
(% unless otherwise indicated)
 2009201020112012
Real GDP growth
World-0.84.84.14.1
OECD-3.52.92.32.1
EU27-4.21.81.61.7
Exchange rates
¥:US$93.787.982.081.0
US$:€1.391.331.271.20
SDR:US$0.650.650.660.67
Financial indicators
Euro 3-month interbank rate1.230.841.031.88
US$ 3-month commercial paper rate0.260.260.340.70
Commodity prices
Oil (Brent; US$/b)61.979.690.082.3
Sugar (US cents/lb)16.921.128.819.8
Food, feedstuffs & beverages (% change in US$ terms)-20.411.727.0-9.9
Industrial raw materials (% change in US$ terms)-25.644.922.3-8.8
Note. Regional GDP growth rates weighted using purchasing power parity exchange rates.

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Outlook for 2011-12: Economic growth

Real GDP growth in Mauritius is forecast to fall from an estimated 4% in 2010 to 3.7-3.9% in 2011-12 as the economic recovery slows in Europe and the US-the destination of more than 70% of Mauritius's exports. Sugar production appears to be failing to respond to the programme for restructuring the sector, now in its fifth year, and sugar's contribution to the economy appears set to continue its decline. Fishing output will benefit from investment in shore-based facilities, but the state of fish stocks will be the determining factor. Manufacturing growth will slow then accelerate, in response to falling then rising demand in Europe and the US, and construction should benefit from investment in infrastructure, as well as easier credit.

The growth of tourism will slow in 2011 in response to slacker demand in Europe, the origin of around 65% of tourists to Mauritius, and the weaker euro; growth will pick up in 2012 as economic conditions in Europe stabilise. Financial sector growth will be buoyant as economic activity picks up generally and as rapid economic expansion continues in India, for which Mauritius is a major conduit of foreign investment. The growth of world trade in 2011-12 will benefit Mauritius as an international shipping hub.

Outlook for 2011-12: Inflation

Year-on-year inflation jumped to 6.1% in December and 6.4% in January as the base effect of low inflation in the second half of 2009 dropped out of the year-on-year calculation and higher global commodity prices and currency depreciation raised the cost of a range of goods. Rising global commodity prices, particularly food and oil prices, will continue to stoke inflation in 2011. Average 12-month inflation is therefore forecast to rise from 2.9% in 2010 to 7.4% in 2011. In 2012, as world commodity prices fall, inflation will decline to 5.2%.

Outlook for 2011-12: Exchange rates

As the US dollar appreciates in 2011-12 the rupee will come under pressure because of Mauritius's large current-account deficit, and we forecast that it will depreciate from an average of MRs30.8:US$1 in 2010 to MRs32.4:US$1 in 2011 and MRs34.3:US$1 in 2012. The average exchange rate of the rupee against the euro, which appreciated by more than 9% in 2010, will be little changed in 2011-12. This may cause some discomfort to exporters and tourism operators, most of whose sales are denominated in euros.

Outlook for 2011-12: External sector

The expansion of exports of textiles and clothing, which account for around 50% of domestic exports, will slow in 2011 as demand falls in their main markets-Europe and North America, which took 74% of Mauritius's exports in the first three quarters of 2010. Other manufacturing exports should see a similar slowdown in growth, although fish exports will rise if the weather and fish stocks favour higher production. Overall, we forecast that the value of exports will rise by 1% in dollar terms in 2011, having risen by an estimated 12% in 2010. In 2012 export growth will accelerate to 3% with the upturn in Europe.

Imports are forecast to grow by 5% in 2011, compared with an estimated 19% in 2010 (following a heavy fall the previous year); the slowdown in the economy-and hence import demand-will be offset by higher world commodity prices. The upturn in economic activity in 2012 will stimulate import demand, although the price of commodity imports will fall. As a result, the trade deficit, estimated at 21% of GDP in 2010, is forecast to rise to 22% of GDP in 2011-12.

Services credits should rise in 2011-12, owing mainly to higher tourism receipts, although debits will also rise in line with imports. Nevertheless, the surplus on the services account is forecast to increase. The surplus on the income account, mostly reflecting earnings on investments abroad, is expected to increase slowly. The surplus on the current transfers account will remain roughly stable in 2011-12. As a result of these trends, we forecast that the current-account deficit, which grew to an estimated 8.8% of GDP in 2010, will widen further in 2011, to 10% of GDP, before narrowing to 9.5% of GDP in 2012.

Outlook for 2011-12: Forecast summary

Forecast summary
(% unless otherwise indicated)
 2009a2010b2011c2012c
Real GDP growth3.04.03.73.9
Gross agricultural production growth8.92.53.03.2
Unemployment rate (av)7.37.57.47.2
Consumer price inflation (av)2.52.97.45.2
Short-term interbank rate19.318.318.321.0
Government balance (% of GDP)d-3.0-4.7-4.6-4.5
Exports of goods fob (US$ m)1,9422,1702,1812,239
Imports of goods fob (US$ m)-3,499-4,153-4,346-4,452
Current-account balance (US$ m)-675-844-995-987
Current-account balance (% of GDP)-7.8-8.8-10.0-9.5
External debt (year-end; US$ bn)4.4b5.35.76.1
Exchange rate MRs:US$ (av)31.9630.7932.3734.29
Exchange rate MRs:US$ (end-period)30.2930.3933.9134.32
Exchange rate MRs:¥100 (av)34.1135.0439.4742.33
Exchange rate MRs:€ (end-period)43.4141.0041.0340.84
a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts. d Fiscal years ending June 30th until 2009; from 2010 fiscal year is same as calendar year.

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The political scene: Eleven senior UN members defect to the MSM

On January 27th 11 senior members of an opposition party, the Union nationale (UN), defected to the Mouvement socialiste militant (MSM), the main partner of the Labour Party in the government coalition. The UN was set up by Ashock Jugnauth in June 2006 after he resigned from the MSM because of the decision of the party's leader, Pravind Jugnauth, to end its opposition alliance with the Mouvement militant mauricien (MMM; June 2006, The political scene). Ashock Jugnauth is Pravind Jugnauth's uncle and the half-brother of the president of Mauritius, Sir Anerood Jugnauth. As a senior member of the MSM, he was minister of health in the MMM-MSM government before the July 2005 parliamentary election.

Ashock Jugnauth's star began to wane in 2007 when the Supreme Court quashed his re-election to parliament on the grounds of corruption, bribery and abuse of office in the run-up to the 2005 election (June 2007, The political scene). In November 2008 the Judicial Committee of the British Privy Council confirmed this verdict and Mr Jugnauth was ejected from the National Assembly. At the parliamentary election in May 2010 the UN and the Mouvement mauricien social-démocrate formed an alliance with the much larger MMM, led by Paul Bérenger, but neither minor party won a single seat.

The 11 defectors from the UN said that they were returning to the MSM because it was a more serious party, with more progressive social and economic policies than the MMM. They also said they could not support Ashock Jugnauth's attachment to the MMM. Their defection is likely to lead to the demise of the UN and to further consolidation in the power of Pravind Jugnauth, who has sought to broaden the MSM's base and considers himself to be a contender to succeed the prime minister, Navin Ramgoolam.

The political scene: The murder of a tourist raises concerns about visitors' safety

The murder of Michaela McAreavey, an Irishwoman on honeymoon in Mauritius, has raised serious concerns about tourist safety and has led to renewed calls for the return of capital punishment. Mrs McAreavey was strangled in her hotel room at the luxury Legends hotel, part of the Naïade group, on January 10th. She is believed to have returned to her room and disturbed two hotel employees who had used the hotel's master key to enter the room to steal valuables. The floor manager and a room attendant have been accused of murder and a further room attendant has been charged with conspiracy to murder. Two other hotel security staff have also been arrested.

That the murder was allegedly carried out by employees of one of Mauritius's premier hotel groups has sent shock waves through the island. Mrs McAreavey was the daughter of a well-known Gaelic football manager in Northern Ireland, and her murder has attracted worldwide headlines. In the past Mauritius has prided itself on the safety of its foreign visitors, which has been one of its major attractions as a tourist destination. The minister of foreign affairs, Arvin Boolell, sent the government's formal condolences to the family. The minister of tourism, leisure and external communication, Nando Bodha, immediately convened a meeting of hoteliers to review security and launched a damage-control exercise through the Mauritius Tourism Promotion Authority.

Mr Ramgoolam issued a forthright condemnation of the perpetrators. He is believed to favour the return of capital punishment and reportedly told the council of ministers that this incident reinforces the urgency of introducing a law to this effect as soon as possible. The issue of capital punishment will divide the government and society in general. The president, Sir Anerood Jugnauth, is a known supporter but the vice-prime minister and leader of the Parti mauricien social-démocrate, Xavier-Luc Duval, is a passionate opponent of capital punishment and could take his party out of the coalition government over the issue.

Economic policy: The IMF and the central bank are positive about prospects

On February 2nd, at the conclusion of an IMF mission to Mauritius for the 2011 Article IV consultation, Fund staff gave a positive assessment of Mauritius's prospects and praised the fiscal and monetary policies adopted by the government and the Bank of Mauritius (BoM), the central bank. According to their press release, performance in 2010 had been better than expected, largely as a result of the authorities' prompt and comprehensive response to the global economic slowdown in 2008-10. The Fund appeared unconcerned over the recent escalation of inflation, which it said was due to exogenous factors that should not result in sustained inflationary pressures "with the appropriate monetary policy response". Current monetary policy appeared "broadly" appropriate, though a more concerted effort should be made to remove excess liquidity. The Fund also reminded the authorities of the need for proper policy co-ordination between the central bank and government. It did caution the government to maintain prudence in its capital spending and tight control on its loans to public enterprises.

The IMF's optimistic assessment was echoed in the annual Letter to Stakeholders from the BoM governor, Rundheersing Bheenick, published on January 27th. Mr Bheenick said that relatively strong economic performance would continue in 2011, the main sources of growth being transport and communications, construction, tourism and financial intermediation. He expressed concern about the impact of continuing uncertainty in the global economy and said that the time was right for Mauritius to reorient its economy away from slow-growing developed countries, mainly in Europe, towards fast-growing emerging markets, particularly in Asia.

Although Mr Bheenick expressed his personal satisfaction with the effect of the policies he had championed, he announced that he was instituting a review of the composition, methods and procedures of the BoM's Monetary Policy Committee (MPC). The MPC contains a number of independent members who have been critical of Mr Bheenick in the past and have used their powers to block some of his actions.

Economic policy: Mauritius leads Africa in an economic freedom survey

According to the latest survey carried out by the Wall Street Journal and a US-based think-tank, the Heritage Foundation, Mauritius enjoys greater economic freedom than any other Sub-Saharan country. This annual survey measures and ranks 183 countries across ten specific freedoms and expresses these as an index, with 100 being the highest possible score. The highest-ranking country in the 2011 Index was Hong Kong, which scored 89.7. Mauritius was ranked 12th in the world, equal with Luxembourg, with a score of 76.2. This puts it near the top of the "mostly free" category and close to the category of just six countries with a score of 80 or above which are classified as "free". Mauritius ranked only slightly lower than the US, which scored 77.8, and higher than the UK, which scored 74.5. It performed well across most freedoms, with corruption being its weakest area.

Index of Economic Freedom, 2011
(score out of 100 unless otherwise indicated)
 MauritiusBotswanaCape VerdeNamibiaSouth AfricaSub-Saharan AfricaIndia
Business freedom82.070.564.872.972.350.736.9
Trade freedom88.075.267.686.477.267.464.2
Fiscal freedom91.978.477.367.969.674.575.4
Government spending80.051.571.074.877.571.977.8
Monetary freedom76.170.979.270.971.969.665.1
Investment freedom90.075.060.055.045.042.935.0
Financial freedom70.070.060.040.060.041.140.0
Property rights60.070.065.030.050.031.250.0
Freedom from corruption54.056.051.045.047.029.134.0
Labour freedom70.460.050.084.656.756.567.2
Average76.268.864.662.762.753.554.6
Rank       
In worlda1240657374124
In Sub-Saharan Africab12345
a Out of 183 countries. b Out of 46 countries.
Source: Heritage Foundation-Wall Street Journal, Index of Economic Freedom, 2011.

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No other country in Sub-Saharan Africa was ranked "mostly free", although eight countries were described as "moderately free". All other countries in the region were described as either "mostly unfree" or "repressed". Mauritius scored 22.7 points above the Sub-Saharan average of 53.5 and 21.6 points above India's score of 54.6. Its ranking has improved steadily since 2004, when it was near the bottom of the "moderately free" category. This reflects the emphasis the government has placed on economic reforms and makes Mauritius one of the most investor-friendly countries in the world, despite its reputation for cronyism.

Mauritius: Index of Economic Freedom, 2004-11
 20042005200620072008200920102011
Score (%)64.367.267.469.472.674.376.376.2
Rank        
World6964773418181212
Sub-Saharan Africa66561111
Source: Heritage Foundation-Wall Street Journal, Index of Economic Freedom.

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Economic performance: Inflation jumps to 6.1%

Data from the Central Statistics Office show that year-on-year inflation rose to 6.4% in January. After remaining steady between 2% and 2.7% in the first nine months of 2010, the rate of inflation rose sharply in the last quarter, reflecting large increases in food and transport caused by rising world food and oil prices. The consumer price index rose by 2.1% in December alone, taking annual inflation above 6% for the first time since December 2008; this was the biggest monthly increase since the index was rebased in 2007.

Consumer prices
(% change, year on year)
 2010           2011
 JanFebMarAprMayJunJulAugSepOctNovDecJan
Fooda3.13.03.33.23.02.63.22.94.24.85.16.35.5
Housing & utilitiesb-2.0-1.9-1.80.60.60.60.50.30.2-1.0-1.41.91.9
Transportc1.92.32.72.21.22.6-1.43.2-1.12.65.17.210.3
All items2.52.42.32.72.52.42.02.62.53.23.96.16.4
 12-month average2.32.11.91.81.81.71.81.92.02.32.62.93.3
a Weight of 28.6% in index. b Weight of 13.1% in index, includes water, electricity, gas and other fuels. c Weight of 14.7% in index.
Source: Central Statistics Office.

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The BoM has warned that interest rates may have to rise if this upward trend continues. On January 27th it published its Inflation Expectations Survey, which showed that one-half of the businesses surveyed expect average inflation to reach 5% in June (as does the Economist Intelligence Unit), compared with 2.9% in December. Earlier, on January 21st, the newly established Petroleum Pricing Committee (January 2011, Economic policy) increased the price of petrol and diesel by 8.5% and 12.3% respectively.

Economic performance: The tourism sector continues to grow strongly

There are further signs of a strong recovery in the tourism sector over the current peak season (October-March), after a shaky period in the middle of 2010. Tourist numbers were 10.7% higher year on year in December, bringing growth for 2010 overall to 7.3%, well above the government's original target of 5%. Arrivals in the fourth quarter were 9.8% higher year on year, compared with 4.8% in the second quarter and 6.2% in the third. The tourism industry's revenue was up by 9.1% in the first 11 months of 2010 on the same period of 2009.

Tourist arrivals
 20072008200920102010      
 YearYearYearYear1 Qtr2 Qtr3 Qtr4 QtrOctNovDec
Arrivals ('000s)907.0930.5871.4934.8250.0189.2207.5288.287.386.0114.9
 % change, year on year15.12.6-6.47.37.34.86.29.88.99.510.7
Source: Ministry of Tourism, Leisure and External Communications.

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Karl Mootoosamy, the director of the Mauritius Tourism Promotion Authority, has forecast a 7% rise in tourist numbers in 2011, to bring the total to just over 1m. The minister of tourism, leisure and external communication, Nando Bodha, praised this performance but said that the industry needed to diversify away from slow-growing European markets and develop a new strategy, perhaps in partnership with other island destinations, to target Asian markets. Air Mauritius has announced that it hopes to fly to China, via Malaysia, by July 2011. However, there is great concern in the industry over the impact on tourist numbers of the widely publicised murder of Michaela McAreavey, an Irish tourist, on January 10th (see The political scene).

Economic performance: Sugar production is set to fall further

The Mauritius Chamber of Agriculture (MCA) has announced that sugar production fell by 3.1% in 2010 compared with 2009, and that production in 2011 is likely to fall still further. It stated that production had fallen despite good weather during most of the growing and harvest season. By contrast, climatic conditions so far this season have been poor, and the MCA said that production in 2011 is unlikely to match that in 2010. After falling sharply in 2005-07, sugar production has remained persistently low despite the priority given by the government to restructuring and reforming the sector. There are indications that the 36% fall in the EU guaranteed price since 2006, together with the euro's decline in value, is driving out small-scale planters.

Sugar production
 2004200520062007200820092010a
'000 tonnes572.3519.8504.9436.0452.0467.2452.5
 % change, year on year6.5-9.2-2.9-13.63.73.4-3.1
a Revised official estimate.
Source: Mauritius Chamber of Agriculture.

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Economic performance: Mauritius plans to build an oil refinery

On January 17th the minister of industry and commerce, Showkutally Soodhun, announced that the government had opened discussions with an Indian company, Mangalore Refinery and Petrochemicals (MRPL), over the construction of a US$2bn oil refinery in the south of the island. According to Mr Soodhun, the refinery could be operational by 2015. The project's aims are to diversify the economy and to reduce Mauritius's dependence on imported fuel, which accounts for 19% of imports and makes the economy vulnerable to imported inflation.

The project would be largely financed by the government, with some contribution from MRPL. It is likely to be opposed by environmental campaigners, who succeeded in persuading the government to adopt green policies in the 2008 budget. They are already concerned about the environmental effect of new holiday complexes and expanding transport infrastructure.

Economic performance: China and Mauritius sign a new co-operation agreement

On January 7th, during a visit by China's vice-premier, Hui Liangyu, Mauritius and China signed a US$9m economic and trade co-operation agreement to fund projects to be agreed by both countries. US$6m will be a grant and US$3m will be an interest-free loan. Mr Hui reiterated China's interest in Mauritius as a gateway to Africa. This interest has grown in recent years, despite the fact that trade between the two countries has not grown as quickly as China's trade with other African countries, and actually fell in 2009 before recovering in 2010.

Trade with China
 2004200520062007200820092010a
Total trade (US$ m)b157.8185.6205.1289.4323.1298.2320.5
 % change, year on year42.917.610.541.111.7-7.733.0
a January-Octtober. b Mauritian exports to China form less than 2% of bilateral trade.
Source: Xinhua News Agency, China Economic Information Service.

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In 2007 the Chinese government and China Development Bank agreed to fund the construction of the US$750m Jin-Fei (formerly Tianli) Economic and Trade Co-operation Zone north of the capital, Port Louis. This business park, the first stage of which is due for completion by 2012, is one of five such zones China hopes to build in Africa. Around 40 Chinese businesses will set up operations ranging from clothes manufacturing to hardware assembly and food processing.

Data and charts: Annual data and forecast

 2006a2007a2008a2009a2010b2011c2012c
GDP       
Nominal GDP (US$ m)6,5077,5219,3268,6689,5929,98310,344
Nominal GDP (MRs m)206,328235,520265,352277,021295,367323,094354,656
Real GDP growth (%)5.15.95.53.04.03.73.9
Expenditure on GDP (% real change)       
Private consumption5.94.56.72.12.62.04.0
Government consumption3.80.6-1.45.12.73.03.5
Gross fixed investment19.05.91.38.9-1.93.06.0
Exports of goods & services7.71.84.0-3.410.95.57.7
Imports of goods & services9.32.51.8-9.25.95.97.7
Origin of GDP (% real change)       
Agriculture0.6-5.43.08.92.53.03.2
Industry3.94.75.01.73.52.03.9
Services5.86.55.52.93.93.43.8
Population and income       
Population (m)1.251.261.271.281.281.291.30
GDP per head (US$ at PPP)10,94011,85412,69713,13113,64714,28615,089
Recorded unemployment (av; %)9.18.57.27.37.57.47.2
Fiscal indicators (% of GDP)d       
Central government budget revenue20.119.321.222.921.120.820.6
Central government budget expenditure25.423.624.526.025.825.425.0
Central government budget balance-5.3-4.3-3.3-3.0-4.7-4.6-4.5
Net public debt69.163.156.662.062.863.865.8
Prices and financial indicators       
Exchange rate MRs:US$ (end-period)34.3428.2231.7630.2930.3933.9134.32
Exchange rate MRs:€ (end-period)45.3141.2044.1443.4141.0041.0340.84
Consumer prices (end-period; %)11.98.76.71.56.15.75.7
Stock of money M1 (% change)9.617.313.014.2-4.07.211.4
Stock of money M2 (% change)10.115.414.78.63.78.310.9
Current account (US$ m)       
Trade balance-1,080-1,418-2,002-1,557-1,984-2,166-2,213
 Goods: exports fob2,3292,2382,3841,9422,1702,1812,239
 Goods: imports fob-3,409-3,656-4,386-3,499-4,153-4,346-4,452
Services balance354636624632710734778
Income balance5022317827236243252
Current transfers balance71125224224194194196
Current-account balance-604-434-976-675-844-995-987
External debt (US$ m)       
Debt stock2,612b4,278b4,966b4,433b5,3015,7116,054
Debt service paid305b252b273b300b332366373
 Principal repayments226125137194b214207194
 Interest79126135b106b124164183
Debt service due305252273b300b332366373
International reserves (US$ m)       
Total international reserves1,3011,8221,7852,3042,6012,3252,366
a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts. d Fiscal years ending June 30th until 2009; from 2010 fiscal year is same as calendar year.
Sources: IMF, International Financial Statistics; Bank of Mauritius; Central Statistics Office; Ministry of Finance and Economic Development; World Bank; Economist Intelligence Unit.

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Data and charts: Quarterly data

 2009   2010   
 1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr
Prices        
Consumer prices (2000=100)115.7116.5117.7117.3118.5119.4120.5122.4
Consumer prices (% change, year on year)4.93.31.30.72.42.52.44.4
Financial indicators        
Exchange rate MRs:US$ (av)33.333.131.629.930.332.030.730.1
Exchange rate MRs:US$ (end-period)33.132.130.530.330.831.930.130.4
Deposit rate (av; %)8.58.48.68.48.48.48.4n/a
Lending rate (av; %)19.319.319.319.319.319.319.3n/a
3-month money market rate (av; %)6.14.44.04.03.93.62.7n/a
M1 (end-period; MRs m)50,95354,08554,76060,90458,84759,26257,08663,835
M1 (% change, year on year)15.017.212.914.215.59.64.24.8
M2 (end-period; MRs m)276,755282,222281,387296,480297,312302,944300,567319,124
M2 (% change, year on year)15.112.68.88.67.47.36.87.6
Semdex stockmarket index (end-period; Jul 31st 1989=100)1,0721,4171,6551,6611,6391,6611,7611,654
Sectoral trends        
Sugar exports (‘000 tonnes)111151239341117122n/a
Tourist arrivals (’000)233181195263250189208288
Tourist nights (‘000)2,2751,6251,9502,7502,4001,7002,100n/a
Tourism receipts (MRs m)10,2657,9847,43610,00811,0218,7898,358n/a
Foreign trade (MRs m)        
Exports fob14,26214,71416,21116,59714,15717,30417,650n/a
 Export-orientated enterprises7,8859,6829,0889,4118,47710,20610,519n/a
Imports cif-25,392-28,498-28,912-35,501-28,803-33,971-33,264n/a
 Import-orientated enterprises3,7844,2225,0725,2414,6265,2565,611n/a
Trade balance-11,130-13,784-12,701-18,904-14,646-16,667-15,614n/a
Foreign payments (US$ m)        
Merchandise trade balance-285-357-351-576-421-463-450n/a
Services balance16911314120921814898n/a
Income balance58-48-549623689n/a
Net transfer payments18323513833916n/a
Current-account balance-39-260-180-179-138-240-247n/a
Reserves excl gold (end-period)1,6971,9432,1192,1792,0892,0592,3202,442
Sources: IMF, International Financial Statistics; Ministry of Finance and Economic Development; Stock Exchange of Mauritius; Bank of Mauritius; Central Statistics Office.

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Data and charts: Monthly data

 JanFebMarAprMayJunJulAugSepOctNovDec
Exchange rate MRs:US$ (av)
200828.528.026.625.827.227.426.727.729.030.432.132.1
200932.433.534.034.033.032.332.031.731.030.429.929.3
201029.930.430.630.732.632.731.030.530.729.730.030.5
Exchange rate MRs:US$ (end-period)
200828.527.226.025.927.827.226.728.528.032.331.831.8
200932.934.433.134.032.432.132.932.630.530.329.530.3
201029.930.730.830.833.631.930.230.930.129.830.430.4
Deposit rate (av; %)
200811.010.810.310.310.010.09.89.89.89.89.510.6
20099.38.38.08.48.48.48.48.49.18.48.48.4
20108.48.48.48.48.48.48.48.48.4n/an/an/a
Lending rate (av; %)
200822.822.522.422.421.021.021.021.922.322.319.819.3
200919.319.319.319.319.319.319.319.319.319.319.319.3
201019.319.319.319.319.319.319.319.319.3n/an/an/a
M1 (end-period; % change, year on year)
200813.911.814.813.814.315.119.121.318.316.515.313.0
200917.519.015.017.919.217.216.315.612.917.615.915.6
201013.213.115.510.913.49.69.43.44.21.64.64.8
M2 (end-period; % change, year on year)
200816.615.614.714.917.317.418.416.616.815.814.014.7
200914.514.215.115.213.912.610.811.08.88.78.78.6
20107.46.77.46.56.77.35.14.96.87.87.47.6
Consumer prices (av; % change, year on year)
20089.910.29.39.29.89.711.511.710.89.78.36.7
20095.24.64.83.82.83.31.91.00.90.10.71.5
20102.52.42.32.72.52.42.02.62.53.23.96.1
Foreign reserves excl gold (US$ m)
20081,8221,8952,0422,0792,0512,0602,0551,9581,9491,7131,7461,743
20091,6431,6391,6971,7501,8411,9431,9632,0942,1192,1632,1962,179
20102,1222,1052,0892,0941,9872,0592,1952,1672,3202,3222,3492,442
Sources: IMF, International Financial Statistics; Haver Analytics; Bank of Mauritius.

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Data and charts: Annual trends charts

Please see graphic below

Data and charts: Monthly trends charts

Please see graphic below

Data and charts: Comparative economic indicators

Please see graphic below

Basic data

Land area

2,040 sq km (1,865 sq km excl the islands of Rodrigues, Agalega and St Brandon)

Population

1.28m (official estimate; mid-2010; 1.24m island of Mauritius only)

Main towns

Population in '000 (2010 estimates)

Port Louis (capital): 156.7

Beau Bassin-Rose Hill: 110.9

Vacoas-Phoenix: 106.9

Curepipe: 84.3

Quatre Bornes: 81.1

Climate

Subtropical

Weather in Port Louis (altitude 55 metres)

Hottest month, January, 23-30°C; coldest months, July-August, 17-24°C; driest month, September, 36 mm average rainfall; wettest month, March, 221 mm average rainfall

Languages

French, English, Creole, Bhojpuri, Tamil, Hindi, Urdu

Religion

Hindu (52%), Muslim (17%), Christian (30%)

Measures

Metric system for most weights and measures; land area is often measured in arpents (1 arpent=0.4221 ha=1.043 acres)

Currency

Mauritius rupee (MRs)=100 cents

Fiscal year

Until end-June 2009 the fiscal year was July 1st-June 30th; a six-month fiscal year was followed to end-December 2009; since January 2010 the fiscal year has been coterminous with the calendar year

Time

Four hours ahead of GMT

Public holidays

Fixed: January 1st-2nd (New Year); February 1st (Abolition of Slavery); March 12th (Independence/Republic Day); May 1st (Labour Day); August 15th (Assumption); November 1st (All Saints' Day); November 2nd (Arrival of Indentured Labourers); December 25th (Christmas)

Movable: Thaipoosam Cavadee (January-February); Maha Shivratree (February-March); Chinese Spring Festival (February-March); Ougadi (March-April); Id el-Fitr (September-October); Ganesh Chaturthi (September); Divali (October-November)

Political structure

Official name

Republic of Mauritius

Form of state

Republic within the Commonwealth

Legal system

Based on English common law, the Napoleonic Code and the 1968 constitution

National legislature

National Assembly; 62 members elected by universal suffrage every five years, in 20 three-member constituencies on the island of Mauritius and one two-member constituency on Rodrigues, plus up to eight "best losers"

Elections

The last general election was held on May 5th 2010; the next election is due in 2015

Head of state

President, elected by a simple majority of the National Assembly; the current president, Sir Anerood Jugnauth, was elected in September 2008

National government

Council of Ministers appointed and headed by the prime minister

Main political parties

Government: Alliance de l'avenir coalition formed by the Labour Party, Mouvement socialiste militant (MSM), and Parti mauricien social-démocrate (PMSD), plus the Mouvement rodriguais (MR); other parties in parliament: Mouvement militant mauricien (MMM), Organisation du peuple rodriguais, Front solidarité mauricienne

Prime minister, minister of defence, home affairs & external communications: Navinchandra Ramgoolam

Deputy prime minister, minister of energy & public utilities: Ahmed Rashid Beebeejaun

Vice-prime ministers

Finance & economic development: Pravind Kumar Jugnauth

Social integration & economic empowerment: Xavier-Luc Duval

Other ministers

Agro-industry & food security: Satya Veyash Faugoo

Arts & culture: Mookhesswur Choonee

Attorney-general: Yatindra Nath Varma

Business, enterprise & consumer protection: Michael Yeung Sik Yuen

Civil service & administrative reforms: Ashit Kumar Gungah

Education & human resources: Vasant Kumar Bunwaree

Environment & sustainable development: Devanand Virahsawmy

Fisheries & Rodrigues: Nicolas Von Mally

Foreign affairs, regional integration & international trade: Arvin Boolell

Gender equality, child development & family: Sheilabhai Bappoo

Health & quality of life: Maya Hanoomanjee

Housing & lands: Abu Twalib Kasenally

Industry & commerce: Showkutally Soodhun

Information & communication technology: Tassarajen Pillay Chedumbrum

Labour, industrial relations & employment: Shakeel Mohamed

Local government & outer islands: Louis Hervé Aimé

Public infrastructure, National Development Unit, land transport & shipping: Anil Kumar Bachoo

Social security, solidarity & reform institutions: Leela Devi Dookun Luchoomun

Tertiary education, science, research & technology: Rajeshwar Jeetah

Tourism, leisure & external communications: Nandcoomar Bodha

Youth & sports: Devanand Ritoo

Governor of the Bank of Mauritius

Rundheersing Bheenick

© 2011 The Economist lntelligence Unit Ltd. All rights reserved
Whilst every effort has been taken to verify the accuracy of this information, The Economist lntelligence Unit Ltd. cannot accept any responsibility or liability for reliance by any person on this information
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