Country Report Mauritius June 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, although the strains of coalition are likely to increase.
  • 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 increase marginally to 4.4% in 2011 and then to fall to 4% in 2012 as growth slows in Europe-the destination of 63% of Mauritius's exports in 2010 and the origin of 65% of its tourists.
  • The current-account deficit is forecast to rise from 8.5% of GDP in 2010 to 10.8% of GDP in 2011 as the trade deficit widens, before falling to 10% of GDP in 2012, mainly owing to an increase in the services surplus.

Monthly review

  • The Best Loser System, which enshrines ethnicity in Mauritius's voting system, is to be reviewed by the UK's Privy Council, which acts as a supreme court for Mauritius.
  • Mr Ramgoolam has been criticised by Reporters sans frontières for an angry outburst against journalists from La Sentinelle, a media group which has long been a target of government criticism.
  • The minister of finance, Pravind Jugnauth, aspires to a doubling of Mauritius's GDP by 2020, equalling its growth of the past ten years, although this could be undermined by the slowing pace of economic reform.
  • The World Bank has issued a report which is critical of the government's social and economic policies.
  • The annual rate of inflation in April remained high, at 7%, largely owing to high global prices for oil and food, increasing the likelihood of an imminent rise in interest rates.
  • Tourist arrivals in April were 22% higher year on year, although this was due to the collapse in tourism in April 2010 because of the Icelandic ash cloud.
  • The European Investment Bank is to lend US$40m for private-sector finance.
  • The trade deficit rose by 15.7% year on year to MRs16.9bn (US$575m) in the first quarter of 2011, largely because of a 63.6% rise in the value of oil imports, which highlights Mauritius's dependence on imported energy.

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), Parti mauricien social-démocrate and Mouvement rodriguais, will be secure in office throughout the forecast period. Commanding 47 of the 69 seats in the National Assembly, the government has the two-thirds majority required to amend the constitution. The alliance agreement between the Labour Party and the MSM mandated that the MSM's leader, Pravind Jugnauth, should serve as minister of finance under the continued prime ministership of the Labour leader, Navin Ramgoolam.

Less than a year after its formation, strains are growing in the coalition-and not only over Mr Jugnauth's well-known ambition to become prime minister. A scandal has erupted over the public purchase of a private clinic owned by Mr Jugnauth's brother-in-law, which casts doubt over the judgement of Mr Ramgoolam himself. The matter is being investigated by the Independent Commission Against Corruption, but members of parliament from the Labour Party as well as the opposition Mouvement militant mauricien (MMM) are calling for a parliamentary inquiry. Mr Ramgoolam is currently resisting the call, but if evidence emerges of a deal between him and Mr Jugnauth over buying the clinic, enough Labour deputies might decide to vote with the MMM and bring down the government. That would precipitate a general election, since there is little likelihood that the Labour Party under Mr Ramgoolam and the MMM led by Paul Bérenger could form an administration.

Apart from the strains affecting the coalition government, 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; the amendment of the Best Loser System, by which additional members of parliament are appointed to increase the representation of ethnic-religious minorities in the National Assembly; the establishment of a Senate; and an increase 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. Assuming that the Labour Party and MSM are still in coalition, one possible scenario is that Mr Ramgoolam, contemplating retirement around the age of 70 (part-way through the 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.

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 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 last November, the finance minister, 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. With a slightly higher assumption of real GDP growth in 2011 (4.4%) than in Mr Jugnauth's budget, the Economist Intelligence Unit forecasts higher overall revenue in 2011 and a deficit of 4.2% of GDP.

The situation will reverse in 2012, when the Ministry of Finance and Economic Development assumes real GDP growth of 4.3%, whereas we forecast 4% growth. We therefore forecast revenue growth of around 5% in 2012, compared with the government's projection of 6.6%, and a fiscal deficit of 4.4% of GDP, compared with the government's projection of 4.1% of GDP. The deficits will be financed by a balance of domestic and external borrowing, and we expect public debt to rise from an estimated 58% of GDP in 2010 to 62% of GDP by the end of 2012.

Outlook for 2011-12: Monetary policy

On March 28th the Bank of Mauritius (BoM, the central bank) raised the repurchase (repo) rate from 4.75% to 5.25%, the first increase since July 2008. Despite rising inflation, the bank had previously hesitated to increase rates because of the likely impact on growth. However, national accounts data suggested that economic growth was better established: real GDP growth in the year to September 2010 was 5.4%, compared with 2.8% in the year to June. The main risk to the economy was now inflation: rising world commodity prices had pushed year-on-year consumer price inflation to 6.8% in February, and it would go on rising (inflation averaged 7% in March and April). The bank's monetary policy committee judged that the time was right "to anchor inflation expectations and prevent the recent rise in consumer price inflation from second-round effects"; another important consideration was the maintenance of positive real interest rates. We expect interest rates to follow the global trend and be raised by another 50 basis points in 2012.

Outlook for 2011-12: International assumptions

International assumptions summary
(% unless otherwise indicated)
 2009201020112012
Real GDP growth
World-0.74.94.34.2
OECD-3.52.92.52.3
EU27-4.21.82.01.7
Exchange rates
¥:US$93.787.982.381.0
US$:€1.391.331.371.26
SDR:US$0.650.650.630.65
Financial indicators
€ 3-month interbank rate1.230.841.331.88
US$ 3-month commercial paper rate0.260.260.320.70
Commodity prices
Oil (Brent; US$/b)61.979.6108.594.5
Sugar (US cents/lb)16.921.124.619.1
Food, feedstuffs & beverages (% change in US$ terms)-20.411.730.0-11.8
Industrial raw materials (% change in US$ terms)-25.644.529.3-10.4
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 increase marginally to 4.4% in 2011 and then fall to 4% in 2012 as the economic recovery slows in Europe-the destination of more than 63% 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 seems 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 in 2012, in response to falling demand in Europe and the US, although construction should benefit from continuing investment in infrastructure.

The growth of tourism will slow in 2011 following the rebound in 2010 (tourist arrivals grew by 7.3% in 2010 after contracting by 6.4% in 2009) and slow further in 2012 in response to slacker demand in Europe-the origin of 65% of tourists to Mauritius in 2010-and the weaker euro. Financial sector growth will remain buoyant, as economic activity picks up generally and rapid economic growth 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 averaged 6.9% in the first four months of 2011, 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. Higher 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 7.6% in 2011. In 2012, as world commodity prices fall, inflation will decline to 5.2%.

Outlook for 2011-12: Exchange rates

The depreciation of the US dollar in 2011 will offset the pressure on the rupee owing to Mauritius's large current-account deficit, and we forecast that it will appreciate from an average of MRs30.8:US$1 in 2010 to MRs28.9:US$1 in 2011. The position will reverse in 2012, when the dollar is expected to strengthen against the euro, as concerns over debt in the euro area reassert themselves following the raising of US interest rates. As a result, we forecast an exchange rate of MRs31: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 steady in 2011 as demand holds up in Europe, the destination of 63% of Mauritius's exports in 2010. Other manufacturing exports should see a similar performance, although fish exports will rise more quickly if the weather and fish stocks favour higher production. Overall, we forecast that the value of exports will rise by 16% in US dollar terms in 2011, having risen by 15% in 2010. In 2012 export growth will slow to 4% with the downturn in Europe.

Imports are forecast to grow by 22% in 2011, compared with 19% in 2010 (following a 20% decline the previous year), the faster growth being largely driven by higher world commodity prices. Slower economic activity in 2012 will weaken import demand, and the effect of this will be compounded by the lower price of commodity imports. As a result of these factors, the trade deficit is forecast to widen to 22% of GDP in 2011-12.

Services credits should increase in 2011-12, mainly as a result of higher tourism receipts, although debits will also rise in line with imports. Nevertheless, the surplus on the services account will grow. 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 8.5% of GDP in 2010, will widen further in 2011, to 10.8% of GDP, before narrowing to 10% of GDP in 2012.

Outlook for 2011-12: Forecast summary

Forecast summary
(% unless otherwise indicated)
 2009a2010a2011b2012b
Real GDP growth3.04.34.44.0
Gross agricultural production growth8.8-1.50.53.2
Unemployment rate (av)7.37.87.47.2
Consumer price inflation (av)2.52.97.65.2
Short-term interbank rate19.319.320.320.8
Government balance (% of GDP)c-2.9-4.6d-4.2-4.4
Exports of goods fob (US$ m)1,9422,2372,5842,681
Imports of goods fob (US$ m)-3,499-4,154-5,057-5,119
Current-account balance (US$ m)-675-824-1,215-1,131
Current-account balance (% of GDP)-7.6-8.5-10.8-10.0
External debt (year-end; US$ bn)3.74.7d5.86.1
Exchange rate MRs:US$ (av)31.9630.7828.9431.02
Exchange rate MRs:US$ (end-period)30.2930.3929.8732.01
Exchange rate MRs:¥100 (av)34.1135.0335.1838.30
Exchange rate MRs:€ (end-period)43.4141.2739.2739.05
a Actual. b Economist Intelligence Unit forecasts. c Fiscal years ending June 30th until 2009; from 2010 fiscal year is same as calendar year. d Economist Intelligence Unit estimates.

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The political scene: The Best Loser System will be reviewed by the Privy Council

The government faces pressure to accelerate plans for electoral reform following the decision by the UK Privy Council, which acts as a supreme court for Mauritius, to consider an appeal against the continuing use of the controversial Best Loser System (BLS) in general elections. Under BLS, up to eight of the seats in the National Assembly are awarded to the best-performing losers from the main parties in constituencies where ethnic or religious communities are under-represented. Candidates are required to declare their religious or ethnic affiliation before standing for election. In the 2010 general election 104 candidates were barred from standing because they refused to do this. By enshrining ethnicity in the voting system BLS is highly controversial, but it has support among the non-Hindu minority.

The case before the Privy Council has been brought by a minor political party, Rezistans ek Alternativ, which has campaigned against BLS for many years. It will have to persuade the Privy Council to reject the decisions of all domestic courts that the system is enshrined in the constitution. The government will not welcome international attention being brought to this practice. The prime minister, Navin Ramgoolam, and the leader of the opposition, Paul Bérenger, both agree on the need for electoral reform. They would like to add a degree of proportionality to the existing first-past-the-post system and to phase out BLS. However, they have both appeared hesitant to take action for fear of upsetting minorities in their own parties. Despite agreeing on the need for change, party leaders appear unable to generate a political consensus to see it through.

The political scene: Mr Ramgoolam faces criticism over press freedom

Mr Ramgoolam has rejected claims by Reporters sans frontières (RSF), an international campaign group for press freedom, that he wants to silence independent journalists and control the press. RSF condemned comments by Mr Ramgoolam against L'Express newspaper at a rally of the ruling coalition on May 1st, when he accused it of being the mouthpiece of the opposition Mouvement militant mauricien (MMM) and described the editor as not being worthy "to shine my shoes". Mauritius was ranked 65th out of 178 countries by RSF in its 2010 Press Freedom Index, a fall of 14 points on its 2009 position. The comments were also condemned by the MMM leader, Mr Bérenger.

Mr Ramgoolam hit back at RSF on May 17th, accusing it of not verifying its facts and said that, although the press had the right to criticise, it also had to accept criticism. He said that he was not criticising objective reporting, but the deliberate distortion of facts and the unfair and biased stance of one section of the media. This was a clear reference to La Sentinelle, the media group which owns L'Express and which has long been the target of government criticism and was even excluded from press conferences during the 2010 election campaign (July 2010, The political scene). The affair has heightened concern that the government's planned media reform legislation (July 2010, The political scene) will actually fail to promote the freedom of the independent press and that tight government controls on the state-owned Mauritian Broadcasting Company will be retained.

Economic policy: Mr Jugnauth aims to double GDP by 2020

The minister of finance and economic development, Pravind Jugnauth, has announced a long-term nominal GDP target of US$20bn by 2020, over double the US9.7bn recorded in 2010. This would reproduce the strong performance of the economy over the past ten years, which saw nominal GDP growing from US$4.6bn in 2000. Addressing the Board of Investment, Mr Jugnauth said that attracting investment would be the key to achieving this repeat of Mauritius's economic miracle. Foreign direct investment (FDI) into Mauritius increased by 67.3% year on year in 2010 to reach MRs13.2bn (US$430m), the main recipients being the financial sector, real estate and the health sector (Indian investment in a private hospital).

The government's rather ambitious aim is to make Mauritius the springboard for foreign investment in Africa. Returning from a visit to Europe, Mr Jugnauth said that he had discussed a number of areas for further FDI with businesspeople there, including renewable energy, construction, logistics, information and communications technology, financial services, tourism in general and medical tourism in particular. However, he did acknowledge that there was worldwide competition for this investment.

The dilemma for Mr Jugnauth is that much of the success of Mauritius's economy since 2005 has been attributed to the economic reforms introduced by his predecessor, Rama Sithanen. These have resulted in Mauritius being ranked as the top country in Sub-Saharan Africa for economic freedom. However, these reforms were politically unpopular and, to some extent, they have been relaxed by Mr Jugnauth, whose economic strategy is based on expansionary economic policies rather than continuing structural and economic reforms. This has been commented on by the IMF and heavily criticised by the World Bank, and could weaken Mauritius's attractiveness to overseas investors and undermine Mr Jugnauth's GDP growth target.

Economic policy: A World Bank report is critical of government policies

Details of a not entirely favourable World Bank report, finalised in April, have now emerged. Following warnings about overall economic policy from the IMF (May 2011, Economic policy), the World Bank has called for changes in the social and economic policies pursued by the coalition government since May 2010. The Country Partnership Strategy Progress Report identifies four major threats to Mauritius's economy. The first is the continuing difficult global environment and the possibility of further exogenous threats. The remaining three threats are all under government control: lack of commitment to the strict reform policies of the previous government; the shift to socially driven polices; and the rising level of public debt.

According to the World Bank, Mauritius lags behind other middle-income countries in its excessively costly and inefficiently targeted welfare system, low public-sector effectiveness and an educational system that does not correspond to the needs of the economy. Its report calls for reform in all three areas and for the government's social and infrastructure investment programmes to be conducted within a responsible overall fiscal policy. It expresses concern that with the rising level of public debt, an economic shock could lead to a downgrading of Mauritius's international credit rating.

This critical report should raise concern in government circles. It will form the basis of discussions with Mauritius's global development partners, particularly the EU, in July. The EU has allocated EUR51m (US$70m) over the period 2008-13 to support the ten-year economic reform programme introduced by the previous government in 2006. Most of this was to be channelled through general budget support. In the light of the World Bank report, the EU may be less willing to provide funding on this delegated basis. It is likely to demand more specific assurances from Mauritius and to hold back payments until policy is amended.

Economic performance: Inflation remains stubbornly high at 7%

According to the latest figures from the Central Statistics Office (CSO), the sharp rise in the annual rate of inflation since last September stabilised a little in April, falling from 7.2% in March to 7%. However, the 12-month average rose for the tenth successive month, to 4.4% in April. The rise in year-on-year inflation from 2.5% in September has been driven by higher world food and oil prices. Food and transport costs, which account for 43.3% of total consumer expenditure, were 6.3% and 11% higher in April 2011 than in April 2010. There was a glimmer of hope as food prices actually fell by 0.4% in April compared with March, their third-and biggest-month-on-month fall in a year, and transport price inflation fell for the first time in seven months.

Current inflation is of great concern to the government, which has been forced to introduce a number of special measures to try to contain political unrest over the cost of living (April 2011, Economic performance). The governor of the Bank of Mauritius (BoM, the central bank), Rundheersing Bheenick, has warned that the repo rate, which was increased from 4.75% to 5.25% in March, is likely to be raised further in the coming months because of rising inflation.

Consumer prices
(% change, year on year)
 2010        2011   
 AprMayJunJulAugSepOctNovDecJanFebMarApr
Fooda3.23.02.63.22.94.24.85.16.35.56.66.96.3
Housing & utilitiesb0.60.60.60.50.30.2-1.0-1.41.91.91.81.71.9
Transportc2.21.22.6-1.43.2-1.12.65.17.210.310.712.411.0
All items2.72.52.42.02.62.53.23.96.16.46.87.27.0
 12-month average1.81.81.71.81.92.02.32.62.93.33.64.04.4
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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Economic performance: The tourist market appears to have rebounded

The number of tourists visiting Mauritius grew by 22.2% in April 2011 compared with April 2010. This apparently dramatic surge came after a disappointing first three months of the year, when the year-on-year change in tourist arrivals fell from 10.9% growth in January to a 2.8% decline in March. However, the record performance in April was distorted by the effects of the collapse of tourist numbers in April 2010 following the Icelandic volcano eruption, which brought a virtual halt to international flights and led to a 6% decline in tourist arrivals. Compared with the depressed market in April 2009, this April's arrivals were still up by 14.7%, but were only 8.7% higher than the relatively normal market in April 2008. Nonetheless, this is still a strong performance, but it comes at the end of the peak season, and the absolute number of arrivals will fall in the months to come. Overall, the situation remains unclear.

Tourist arrivals and revenue
 200920102010   2011   
 YearYear1 Qtr2 Qtr3 Qtr4 QtrJanFebMarApr
Arrivals ('000)871.4934.8250.0189.2207.5288.2101.977.483.379.2
 % change, year on year-6.47.37.34.86.29.810.96.9-2.822.2
Earnings (MRs bn)35.739.511.08.88.411.34.13.74.2n/a
 % change, year on year-13.410.57.410.112.412.80.510.115.8
 US$ m1,121.31,285.6363.3275.3272.3374.7136.0124.3145.7
  % change, year on year-22.914.717.614.115.611.7-0.214.223.3
Sources: Ministry of Tourism, Leisure and External Communications; Bank of Mauritius.

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The conflicting signals are confirmed by the latest profit results from two of Mauritius's main hotel chains. Sun Resorts saw its first-quarter profits down by 8.9% year on year, which it attributed to the slow performance of the European market. In contrast, New Mauritius Hotels saw its half-year profits up by 17%, although it warned that prospects were uncertain. Against this background, the statistics office says that it expects 980,000 tourists to visit Mauritius in 2011, an increase of 4.8%. This falls short of the 7% growth that the Mauritius Tourist Promotion Authority hoped would lift arrivals to over 1m in 2011.

The uncertainty over the prospects for Mauritius's traditional markets in Europe makes the outlook for the tourism sector uncertain. To counter the dependence on Europe, the minister of tourism, leisure and external communications, Nandcoomar Bodha, has led a delegation to China, whose overseas tourist market of 57m is expected to grow to 80m by 2015. Currently, Chinese tourist account for only 1.2% of Mauritian visitors, less than one-third of the number of Indian tourists, but Chinese numbers grew by 30.3% year on year in the first quarter of 2011. Mr Bodha announced a target of doubling the number of Chinese visitors by the end of the year.

Economic performance: The EIB lends €30m for private-sector investment

On May 23rd the European Investment Bank (EIB), the EU's long-term funding institution, announced a EUR30m (US$4om) loan to the State Bank of Mauritius, the country's second-largest commercial bank, to provide long-term finance for the private sector. Part of the funding will be targeted at small and medium-sized enterprises. The EIB gave a similar EUR20m loan in 2005 and more recently provided EUR28m credit for the restructuring of the sugar industry.

This is a further illustration of the role the EU is playing in promoting the development and diversification of Mauritius's economy. It also shows how important it will be for Mauritius to retain the confidence of the EU in its economic policy. This confidence will be weakened by the World Bank's recent Country Partnership Strategy Report, which criticised current government economic policy.

Economic performance: The trade deficit increases by 15.7% in the first quarter

According to provisional estimates from the CSO, Mauritius's trade deficit was MRs16.9bn (US$575m) in the first quarter of 2011, 15.7% higher than a year earlier. The continuing high level of the trade deficit matches the 16% rise in 2010 as a whole. The value of exports rose sharply in the first quarter, by 25.6% year on year, helped by the strong growth in both sugar exports, which were up by 167.1%, and clothing exports, up by 20.8%. However, the value of imports, which is just over double that of exports, rose by 20.6% year on year, pushing the trade deficit up to its uncomfortably high level.

The main cause of the continuing surge in imports was the 63.6% increase in the value of imports of fuels and lubricants. These accounted for 27% of total imports, compared with 20% in the first three months of 2010, and were driven up by higher world oil prices. This illustrates Mauritius's dependence on imported energy and the vulnerability of the economy to global developments; the resulting large trade deficit will continue to be one of the main constraints on economic policy.

External trade
(MRs bn unless otherwise indicated)
200720082009201020102011
YearYearYearYeara% changeb1 Qtra1 Qtra% changec
Exports (fob)69.768.061.769.612.814.217.825.6
Domestic exports50.546.445.850.911.39.812.730.0
Sugar9.68.36.87.713.40.82.2167.1
Clothing24.722.021.723.05.84.95.920.8
Fish6.16.16.97.813.51.61.64.6
Re-exports13.812.610.411.16.12.72.71.8
Ships' stores & bunkering5.49.05.57.637.01.72.337.4
Imports (cif)121.0132.2118.4135.414.328.834.720.6
Food20.023.822.124.611.65.85.92.1
Fuels & lubricants22.228.418.625.939.65.79.463.6
Machinery & transport equipment28.525.927.727.5-0.95.85.7-1.1
Road vehicles5.26.15.46.824.81.41.56.7
Trade balance-51.3-64.2-56.8-65.816.0-14.6-16.915.7
% of GDP-21.0-23.4-20.1-21.9
a Provisional. b 2010/09. c 1 Qtr 2011/1 Qtr 2010.
Source: Central Statistics Office.

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Data and charts: Annual data and forecast

 2006a2007a2008a2009a2010a2011b2012b
GDP       
Nominal GDP (US$ m)6,7327,7929,6418,8659,72911,23311,250
Nominal GDP (MRs m)213,444243,998274,316283,329299,489325,103349,024
Real GDP growth (%)5.15.95.53.04.34.44.0
Expenditure on GDP (% real change)       
Private consumption5.94.56.72.12.63.23.0
Government consumption3.80.6-1.45.13.43.22.0
Gross fixed investment19.05.91.38.9-0.73.21.0
Exports of goods & services7.71.84.0-3.515.94.06.0
Imports of goods & services9.32.51.8-9.17.57.65.9
Origin of GDP (% real change)       
Agriculture0.6-5.43.08.8-1.50.53.2
Industry3.94.75.01.73.53.33.7
Services5.86.55.52.94.74.43.8
Population and income       
Population (m)1.251.261.271.281.281.291.29
GDP per head (US$ at PPP)11,29712,24013,11113,55914,21115,00615,974
Recorded unemployment (av; %)9.18.57.27.37.87.47.2
Fiscal indicators (% of GDP)c       
Central government budget revenue20.119.321.222.320.8d20.920.4
Central government budget expenditure25.423.624.525.225.5d25.124.8
Central government budget balance-5.3-4.3-3.3-2.9-4.6d-4.2-4.4
Net public debt69.163.156.660.357.7d59.761.5
Prices and financial indicators       
Exchange rate MRs:US$ (end-period)34.3428.2231.7630.2930.3929.8732.01
Exchange rate MRs:€ (end-period)45.3141.2044.1443.4141.2739.2739.05
Consumer prices (end-period; %)11.98.76.71.56.16.05.7
Stock of money M1 (% change)9.617.313.014.24.86.49.0
Stock of money M2 (% change)10.115.414.78.67.67.58.4
Current account (US$ m)       
Trade balance-1,080-1,418-2,002-1,557-1,917-2,473-2,437
 Goods: exports fob2,3292,2382,3841,9422,2372,5842,681
 Goods: imports fob-3,409-3,656-4,386-3,499-4,154-5,057-5,119
Services balance354636624632708819859
Income balance5022317827201234243
Current transfers balance71125224224183205205
Current-account balance-604-434-976-675-824-1,215-1,131
External debt (US$ m)       
Debt stock2,9504,1324,1603,7174,695d5,8086,116
Debt service paid305252273202276d318335
 Principal repayments226126137107157d144142
 Interest7912613594123d176194
Debt service due305252273202274d316332
International reserves (US$ m)       
Total international reserves1,3011,8221,7852,3042,6012,3232,361
a Actual. b Economist Intelligence Unit forecasts. c Fiscal years ending June 30th until 2009; from 2010 fiscal year is same as calendar year. d Economist Intelligence Unit estimates.
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   2011
 2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr
Output        
Industrial production (2007=100)109.7102.8119.695.5107.9104.7126.9n/a
Industrial production (% change, year on year)1.92.06.84.9-1.61.86.1n/a
Prices        
Consumer prices (2000=100)116.5117.7117.3118.5119.4120.5122.4126.6
Consumer prices (% change, year on year)3.31.30.72.42.52.44.46.8
Financial indicators        
Exchange rate MRs:US$ (av)33.131.629.930.332.030.730.129.4
Exchange rate MRs:US$ (end-period)32.130.530.330.831.930.130.428.4
Deposit rate (av; %)8.48.68.48.48.48.48.48.4
Lending rate (av; %)19.319.319.319.319.319.319.319.3
3-month money market rate (av; %)4.44.04.03.93.62.72.11.8
M1 (end-period; MRs m)54,08554,76060,90458,84759,26257,08663,83560,012
M1 (% change, year on year)17.212.914.215.59.64.24.82.0
M2 (end-period; MRs m)282,222281,387296,480297,312302,944300,567319,124315,401
M2 (% change, year on year)12.68.88.67.47.36.87.66.1
Semdex stockmarket index (end-period; Jul 31st 1989=100)1,4171,6551,6611,6391,6541,7611,9672,006
Sectoral trends        
Sugar exports (‘000 tonnes)151239341117122152116
Tourist arrivals ('000)181195262250189208288263
Tourism receipts (MRs m)7,9847,43610,00811,0218,7898,35811,28911,949
Foreign trade (MRs m)        
Exports fob14,69916,13016,53814,15717,30417,65020,44517,778
 Export-orientated enterprises9,6829,0889,4118,47710,20610,51910,6159,605
Imports cif-28,498-28,887-35,709-28,803-34,018-33,264-39,309-34,725
 Export-orientated enterprises4,2225,0725,2414,6265,2565,6115,1245,164
Trade balance-13,799-12,757-19,171-14,646-16,714-15,614-18,864-16,947
Foreign payments (US$ m)        
Merchandise trade balance-357-351-576-422-463-450-561n/a
Services balance11314120921714899247n/a
Income balance-48-54959368621n/a
Net transfer payments32351383396081n/a
Current-account balance-260-180-179-142-240-205-213n/a
Reserves excl gold (end-period)1,9432,1192,1792,0892,0592,3202,4422,575
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)
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
201130.229.428.727.9n/an/an/an/an/an/an/an/a
Exchange rate MRs:US$ (end-period)
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
201129.529.228.427.4n/an/an/an/an/an/an/an/a
Deposit rate (av; %)
20099.38.38.08.48.48.48.48.49.18.48.48.4
20108.48.48.48.48.48.48.48.48.48.48.48.4
20118.48.48.4n/an/an/an/an/an/an/an/an/a
Lending rate (av; %)
200919.319.319.319.319.319.319.319.319.319.319.319.3
201019.319.319.319.319.319.319.319.319.319.319.319.3
201119.319.319.3n/an/an/an/an/an/an/an/an/a
M1 (end-period; % change, year on year)
200917.519.015.017.919.217.216.315.612.917.615.915.6
201013.213.115.510.913.49.69.43.44.21.64.83.5
20114.83.12.05.0n/an/an/an/an/an/an/an/a
M2 (end-period; % change, year on year)
200914.514.215.115.213.912.610.811.08.88.78.78.6
20107.46.77.46.56.77.35.14.96.87.47.07.6
20117.56.76.16.6n/an/an/an/an/an/an/an/a
Consumer prices (av; % change, year on year)
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
20116.46.87.27.0n/an/an/an/an/an/an/an/a
Foreign reserves excl gold (US$ m)
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
20112,4262,4372,5752,636n/an/an/an/an/an/an/an/a
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

Key ministers

Agro-industry & food security: Satya Veyash Faugoo

Arts & culture: Mookhesswur Choonee

Attorney-general: Yatindra Nath Varma

Business, enterprise, trade & 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 & co-operatives: 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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