Академический Документы
Профессиональный Документы
Культура Документы
Country Report
Mauritius
________________________________________________________________________________
The Economist Intelligence Unit
The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing
operations across national borders. For 60 years it has been a source of information on business
developments, economic and political trends, government regulations and corporate practice worldwide.
The Economist Intelligence Unit delivers its information in four ways: through its digital portfolio, where
the latest analysis is updated daily; through printed subscription products ranging from newsletters to
annual reference works; through research reports; and by organising seminars and presentations. The
firm is a member of The Economist Group.
London New York
The Economist Intelligence Unit The Economist Intelligence Unit
20 Cabot Square The Economist Group
London 750 Third Avenue
E14 4QW 5th Floor
United Kingdom New York, NY 10017, US
Tel: +44 (0) 20 7576 8181 Tel: +1 212 541 0500
Fax: +44 (0) 20 7576 8476 Fax: +1 212 586 0248
E-mail: eiucustomerservices@eiu.com E-mail: eiucustomerservices@eiu.com
Copyright
© 2018 The Economist Intelligence Unit Limited. All rights reserved. Neither this publication nor any
part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means,
electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The
Economist Intelligence Unit Limited.
All information in this report is verified to the best of the author's and the publisher's ability. However,
the Economist Intelligence Unit does not accept responsibility for any loss arising from reliance on it.
ISSN 2047-5330
Mauritius
Summary
2 Briefing sheet
Summary
15 Basic data
17 Political structure
Recent analysis
Politics
20 Forecast updates
Economy
21 Forecast updates
24 Analysis
Briefing sheet
Editor: Sreya Ram
Forecast Closing Date: October 19, 2018
Election watch
The next general election is due in December 2019. We expect Alliance Lepep's popularity to
decline in the run-up to the election because of internal tensions within the coalition, increased
popular perceptions of corruption and slow economic growth. This will give opposition parties an
opportunity to take advantage of growing antigovernment sentiment—as Alliance Lepep did at
the previous election.
The political landscape is fragmented and fluid—currently seven parties are represented in the
legislature. But we expect a new opposition coalition to emerge in the run-up to the next election.
Although there is no clear alliance yet, a broad enough anti-Alliance Lepep coalition has a good
chance of winning the next election.
International relations
Mauritius's foreign policy will continue to focus on securing favourable access to developed
markets for the country's exports, encouraging foreign investment and cultivating strong
relationships with key economic partners. Mauritius is now part of a new pan-African trade pact,
the Tripartite Free-Trade Area, which will provide the country with an opportunity to bolster
relations with member countries. Mauritius's ambition to establish itself as a regional business
centre has been put at risk by the revision of one of its major double taxation avoidance
agreements (DTAAs), with India. The agreement will be phased out in 2019. Ties with India will,
however, remain close. India has extended several lines of credit to Mauritius—to support the
development of its infrastructure, including a light railway project—and has remained among the
largest exporters of goods and services to Mauritius over the past decade. The government will
increase its efforts to negotiate other investor-protection agreements and favourable DTAAs with
emerging markets. Yet progress is likely to be slow given waning support for globalisation in
many parts of the world.
Bilateral relations with China will remain strong; we expect China to continue to provide financial
and technical assistance to Mauritius. Meanwhile, relations with the UK will continue to be
overshadowed by a long-standing dispute over sovereignty of the Chagos Islands. In mid-2017
the case was referred to the International Court of Justice, which began hearing arguments in
September 2018; a verdict is yet to be announced. Although Mauritian politicians will continue to
denounce British policy on this issue, economic and cultural relations between the two countries
will remain close as they seek to safeguard their commercial relations.
Policy trends
Mauritius remains among the most business-friendly countries in Sub-Saharan Africa, and the
government has increased its efforts to implement more pro-business initiatives and attract
investment in key export sectors. The government aims to invest in education and training, create
more job opportunities and reduce income inequality. Nonetheless, the authorities' penchant for
interventionist and populist measures—such as welfare payments, salary topups for lowpaid
workers and a minimum wage, introduced in January 2018—will continue to have repercussions in
terms of cost competitiveness and inflation.
To increase the country's resilience to shocks, the government will continue its efforts to diversify
the "four pillar" economy based on sugar, textiles, tourism and financial services. However, high
current spending pressures and inefficient spending processes will hinder execution of the
diversification plan. In addition, the need to meet the debt target—central government debt is
required by law to fall below 60% of GDP by fiscal year 2020/21 (JulyJune)—will reduce the
amount of funding available for investment in diversification. We forecast that the public debt
stock (including that owed by state-owned companies) will decline as the forecast period
progresses, to 54.6% of GDP at end-2023.
Fiscal policy
The government will maintain a relatively expansionary fiscal stance and a long-held populist bent
over the forecast period. Total spending is budgeted to increase by 9.5% year on year in 2018/19,
with social benefits and direct subsidies constituting a major proportion of recurrent expenditure.
The plans also include investment in infrastructure development (including a metro express rail
project and expanding other industrial infrastructure and logistic facilities). However, we do not
expect the government to be able to execute its 2018/19 spending plans fully. We expect high
current spending pressures and an ambitious public investment programme to keep expenditure
high throughout the forecast period.
The government's revenue projections for 2018/19 are based on overoptimistic growth projections
(the government's real GDP growth targets of 3.9% in 2018 and 4.1% in 2019 are likely to be
missed; we expect economic growth to slow to 3.6% in 2019) and were drawn up against a
backdrop of an uncertain external environment (particularly in the postBrexit UK—a key
investment and trading partner for Mauritius). The government has introduced several tax
incentives, such as five-year tax holidays, increased income tax thresholds and a reduction in the
number of tax brackets, which limits the scope to raise income from direct taxes. We expect
revenue growth to be slower than forecast by the government until 2019/20 as domestic economic
growth remains sluggish and authorities hold off on unpopular tax reforms ahead of the general
election. We then expect revenue growth, in line with quicker domestic economic growth, to pick
up towards the end of the forecast period.
Overall, given the uncertain revenue picture, high current spending pressures and an ambitious
public investment programme, we expect a widening of the fiscal deficit from 4.1% of GDP in
2018/19 to 4.3% of GDP in 2019/20. We then forecast a narrowing of the deficit to 3.4% of GDP in
2022/23 as the government intensifies efforts to boost revenue collection.
Monetary policy
The Bank of Mauritius (the central bank) prioritises boosting economic activity. It left its key repo
rate unchanged in August, having last lowered it in September 2017, from 4% to a historical low of
3.5%. However, we expect the Federal Reserve (Fed, the US central bank) to accelerate the pace of
its interest-rate increases in 2019 to combat expectations of faster inflation in the US; higher
returns there could attract capital outflows from Mauritius—a small, open economy. We therefore
expect a tightening of monetary policy before end-2019. An increase in the policy rate is likely to
be relatively small, though, given the country's sluggish economic growth prospects. A modest
recovery in the US thereafter should allow for one rate rise a year in the US in 2021-22, followed by
two increases in 2023 (with rates in 2023 being even higher than in 2019). Despite a moderation of
inflationary pressures in Mauritius, we expect one rate increase a year in 2021-23, broadly in line
with the Fed rate hikes. There are downside risks to this scenario stemming from both local
factors, such as a potential deterioration of domestic economic conditions, and external factors,
given the vulnerability of Mauritius to global market volatility, which could lead to another cut in
interest rates.
International assumptions
2018 2019 2020 2021 2022 2023
Economic growth (%)
US GDP 2.9 2.2 1.3 1.7 2.0 1.9
OECD GDP 2.3 2.0 1.5 1.9 2.0 1.9
World GDP 3.0 2.7 2.5 2.7 2.8 2.7
World trade 4.0 3.7 3.0 4.0 3.7 3.9
Inflation indicators (% unless otherwise indicated)
US CPI 2.6 2.4 1.6 1.8 1.7 1.8
OECD CPI 2.5 2.5 2.0 2.0 2.0 2.0
Manufactures (measured in US$) 6.3 3.6 3.0 2.4 3.6 2.9
Oil (Brent; US$/b) 75.2 76.8 70.8 74.8 77.4 76.1
Non-oil commodities (measured in US$) 2.4 -0.1 2.6 1.6 1.3 0.9
Financial variables
US$ 3-month commercial paper rate (av; %) 2.1 2.9 2.5 2.6 2.9 3.2
US$:€ (av) 1.18 1.19 1.21 1.21 1.24 1.24
¥:US$ (av) 110.15 110.91 108.64 104.88 100.46 96.08
Economic growth
As a small, open economy, Mauritius will be affected by global economic trends, especially
conditions in Europe, the US and China. Despite diversification efforts, Europe still accounts for
around half of Mauritius's exports and tourist arrivals, and is a major source of investment.
Mauritius's real GDP growth will slow in 2019-20 owing to a deceleration in the growth momentum
of Mauritius's key trading partners—Europe, the US and China—in those years, which will lead to
a fall in exports. Moreover, in line with our expectation of monetary tightening towards the end of
2019, we expect a slowdown in private consumption growth in 2020, which will act as another drag
on the pace of growth, although it will be partly offset by sustained government consumption.
(Private consumption accounts for around 65% of GDP.) A slowdown in US economic growth in
2020 will also moderate the pace of growth in manufacturing (and particularly the textile sector).
This will be only partly offset by a strong performance of the construction sector, driven by
public investment in infrastructure, and tourism sector growth, which will be boosted by an
increase in arrivals from emerging markets.
Following these trends, we expect real GDP growth to fall from an estimated 3.8% in 2018 to 3.6%
in 2019 and 2.8% in 2020. In 2021-23 export growth will pick up owing to an economic recovery in
Mauritius's key trading partners and efforts to develop and expand port infrastructure. In addition,
higher public investment will support economic activity. Following these developments,
we expect real GDP growth to average 4.1% a year in 2021-23. However, Mauritius's vulnerability
to external factors, such as renewed weakness in the euro zone and instability in emerging
markets, poses a significant downside risk to our forecast.
Economic growth
% 2018a 2019b 2020b 2021b 2022b 2023b
GDP 3.8 3.6 2.8 3.8 4.1 4.4
Private consumption 3.3 3.0 2.2 2.5 3.0 3.1
Government consumption 3.1 2.7 3.2 3.2 2.5 2.5
Gross fixed investment 4.7 4.7 3.8 4.0 5.0 5.5
Exports of goods & services 2.0 2.2 2.5 5.1 5.4 6.1
Imports of goods & services 1.8 1.6 2.5 3.2 3.6 4.0
Domestic demand 3.5 3.2 2.8 3.0 3.3 3.5
Agriculture 3.4 3.0 3.0 2.0 2.0 2.2
Industry 3.0 3.0 2.0 4.4 3.8 4.4
Services 3.6 3.4 3.0 3.4 4.0 4.4
a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts.
Inflation
The country will remain heavily dependent on imports of food and fuel, which have a heavy
weighting in the consumer price index. As a result, exchange-rate movements and global
commodity prices have a significant influence on domestic inflation, although price controls on
some basic foods and the country's petrol price stabilisation fund limit their impact. Wage growth
tends to outpace inflation and productivity gains in Mauritius, which will maintain upward price
pressure throughout the forecast period. In 2018 rising incomes (on the back of the introduction
of a minimum wage) and an expansionary fiscal policy will put upward pressure on inflation.
However, falling food prices and appreciation of the Mauritius rupee against the US dollar will
prevent inflationary pressures from accelerating significantly. We estimate average inflation at
3.9% in 2018. In 2019 we expect inflationary pressures to increase on the back of rising global oil
prices, depreciation of the rupee and pre-election expansionary fiscal policy. Inflation will average
4.6% in 2019. In 2020 we forecast that inflation will drop to 2.4% amid weaker domestic demand, a
dip in world oil prices and a slightly stronger currency. Over the remainder of the forecast period
we expect inflation to rise to an annual average of 3.6%, driven by higher global commodity prices
(barring a slight dip in oil prices in 2023), accompanied by rising domestic demand.
Exchange rates
The rupee has a past record of tracking the value of the euro against the US dollar. We expect the
euro to strengthen against the US dollar in 2019-20, on the assumption that the region's recovery
will continue while growth momentum in the US slows, as a result of its escalating trade dispute
with China, and the Fed embarks on a policy easing cycle in 2020. A tepid recovery in the US and
moves by the European Central Bank to unwind its accommodative monetary policy will then keep
the euro-dollar exchange rate broadly stable in 2021. In 2022 the euro will appreciate on average
again as macroeconomic fundamentals in the euro zone improve more strongly than those in the
US before remaining broadly unchanged in 2023. Tracking these dynamics, we expect the average
value of the rupee to weaken from an estimated MRs33.9:US$1 in 2018 to MRs34.50:US$1 in 2019
and then to appreciate to an average MRs33.1:US$1 in 2020-23.
External sector
Growth in export earnings will remain sluggish in 2019 mainly because of falling sugar output, and
thus exports, owing to increased competition from international markets, especially the EU,
following an EU policy reform that increased sugar production quotas for the bloc and depressed
international sugar prices. Export earnings will then decline in 2020 as the US economy slows
before picking up in 2021-23 as global economic activity increases. Imports of capital goods (as
part of the government's investment programme) will remain high in 2019-20 and will pick-up more
strongly in 2021-23 as robust economic activity pushes up domestic demand. In addition, higher
oil prices (despite a dip in 2020 and 2023) will push up the import bill in 2019-23. Overall, the
merchandise trade deficit will remain large in 2019-20, averaging 19.6% of GDP a year. From 2021
export growth will outpace import growth and the trade deficit will narrow to an annual average of
17% of GDP in 2021-23.
The services surplus as a proportion of GDP will fall from an estimated 5.8% of GDP in 2018 to an
annual average of 5.2% in 2019-20 in line with weaker global economic growth, which will affect
exports of financial, insurance and communication services. The services surplus as a proportion
of GDP will rise in 2021-23 to an annual average of 5.4% as world economic growth accelerates and
supports export earnings from tourism and financial and communications services. Following the
revision to the DTAA with India, we expect slower growth in primary income inflows—which
mostly reflects income from offshore companies' overseas investments—and a consequent
gradual fall in the primary income surplus as a percentage of GDP. The small secondary income
deficit will narrow marginally as a proportion of GDP, as remittances from Mauritians in Europe are
partly offset by those from foreign workers in Mauritius, from an estimated 1.9% in 2018 to 1.6%
in 2023.
Overall, the current-account deficit will widen from an estimated 7.1% of GDP in 2018 to 9.9% of
GDP in 2020. It will then gradually narrow to 7.1% of GDP in 2023, reflecting the developments on
the trade balance. The deficits will be financed mainly by private-sector borrowing and foreign
investment inflows into the services sector.
Forecast summary
Forecast summary
(% unless otherwise indicated)
2018a 2019b 2020b 2021b 2022b 2023b
Real GDP growth 3.8 3.6 2.8 3.8 4.1 4.4
Gross agricultural production growth 3.4 3.0 3.0 2.0 2.0 2.2
Unemployment rate (av) 7.0 7.0 6.9 6.8 6.8 6.7
Consumer price inflation (av) 3.9 4.6 2.4 3.2 3.7 3.8
Short-term interbank rate 8.5 8.5 8.5 9.0 9.0 10.0
Government balance (% of GDP) -3.3 -4.1 -4.3 -4.1 -3.8 -3.4
Exports of goods fob (US$ m) 2,425 2,418 2,182 2,320 2,616 2,750
Imports of goods fob (US$ m) -5,135 -5,237 -5,345 -5,451 -5,887 -5,941
Current-account balance (US$ m) -988 -1,091 -1,560 -1,475 -1,527 -1,485
Current-account balance (% of GDP) -7.1 -7.4 -9.9 -8.8 -7.9 -7.1
External debt (year-end; US$ bn) 20.8 22.3 24.0 24.3 25.3 25.2
Exchange rate MRs:US$ (av) 33.89 34.50 34.10 34.01 32.12 32.12
Exchange rate MRs:US$ (end-period) 34.20 34.57 33.89 33.75 29.67 33.01
Exchange rate MRs:¥100 (av) 30.77 31.10 31.39 32.43 31.97 33.43
Exchange rate MRs:€ (endperiod) 39.50 42.00 40.67 41.35 36.94 41.09
a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts.
Quarterly data
2016 2017 2018
3
4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr
Qtr
Output
Industrial production (2007=100) 115.0 90.4 102.7 105.7 117.5 91.8 103.8 n/a
Industrial production (% change, year on year) 1.5 0.6 2.5 1.8 2.2 1.5 1.1 n/a
Prices
Consumer prices (2012=100) 96.4 98.3 101.0 100.7 100.1 104.8 103.4102.2
Consumer prices (% change, year on year) 2.0 1.4 5.1 4.5 3.8 6.6 2.4 1.5
Financial indicators
Exchange rate MRs:US$ (av) 35.8 35.6 34.9 33.5 33.9 32.9 34.2 34.3
Exchange rate MRs:US$ (end-period) 36.0 35.3 34.5 33.8 33.5 33.2 34.6 34.2
Deposit rate (av; %) 4.8 3.3 3.1 3.4 2.4 2.8 3.3 n/a
Lending rate (av; %) 8.5 8.5 8.5 8.5 8.5 8.5 8.5 n/a
3-month money market rate (av; %) 1.4 1.1 0.9 0.8 0.9 2.1 3.4 n/a
M1 (end-period; MRs m) 102,001101,825102,471 n/a n/a n/a n/a n/a
M1 (% change, year on year) 11.6 12.2 8.8 n/a n/a n/a n/a n/a
M2 (end-period; MRs m) 477,789485,071 n/a n/a n/a n/a n/a n/a
M2 (% change, year on year) 9.1 9.6 n/a n/a n/a n/a n/a n/a
Semdex stockmarket index (end-period; July 31st
1,808 1,933 2,123 2,230 2,202 2,288 2,2452,251
1989=100)
Sectoral trends
Sugar exports (‘000 tonnes) 111 123 118 119 80 70 69 n/a
Tourist arrivals (’000) 394 340 286 309 407 356 290 328
Tourism receipts (MRs m) n/a 16,086 13,233 n/a n/a18,48314,976 n/a
Foreign trade (MRs m)
Exports fob 21,104 19,687 20,34821,11120,17118,10020,238 n/a
Export-orientated enterprises 11,198 9,397 11,14911,69710,902 9,85311,354 n/a
- - - -
Imports cif -43,632 -39,188 -42,058 n/a
41,134 49,398 37,366 45,786
Export-orientated enterprises 6,127 5,779 6,933 6,951 7,517 5,911 6,867 n/a
- - - -
Trade balance -22,528 -19,501 -21,710 n/a
20,023 29,227 19,266 25,548
Foreign payments (US$ m)
Merchandise trade balance -635 -548 -622 -598 -862 -586 -747 n/a
Services balance 278 203 168 133 270 317 214 n/a
Primary income balance 247 249 302 312 371 294 367 n/a
Net transfer payments -20 -44 -71 -48 -94 -84 -65 n/a
Current-account balance -130 -140 -223 -201 -314 -59 -230 n/a
Reserves excl gold (end-period) 4,504 4,505 4,764 4,971 5,466 5,714 6,169 n/a
Sources: IMF, International Financial Statistics; Ministry of Finance and Economic Development; Stock Exchange of
Mauritius; Bank of Mauritius; Central Statistics Office.
Monthly data
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Exchange rate MRs:US$ (av)
2016 36.1 35.7 35.6 35.1 35.2 35.4 35.5 35.2 35.3 35.6 35.8 35.9
2017 35.8 35.5 35.4 35.3 34.8 34.7 34.1 33.1 33.2 34.0 34.0 33.7
2018 33.0 32.6 33.0 33.7 34.5 34.4 34.3 34.3 34.3 n/a n/a n/a
Exchange rate MRs:US$ (end-period)
2016 36.0 35.8 35.4 35.0 35.4 35.5 35.4 35.3 35.4 35.9 36.0 36.0
2017 35.6 35.6 35.3 35.0 34.8 34.5 33.4 32.7 33.8 34.3 33.6 33.5
2018 32.3 32.8 33.2 34.2 34.4 34.6 34.1 34.2 34.2 n/a n/a n/a
Deposit rate (av; %)
2016 5.8 5.8 5.3 5.3 5.3 5.3 5.3 4.8 4.8 4.8 4.8 4.8
2017 3.6 3.6 2.9 3.3 3.0 2.9 3.5 4.4 2.4 2.1 3.0 2.1
2018 2.1 3.0 3.4 3.4 3.4 3.2 3.6 3.7 n/a n/a n/a n/a
Lending rate (av; %)
2016 8.5 8.5 8.5 8.5 8.5 8.5 8.5 8.5 8.5 8.5 8.5 8.5
2017 8.5 8.5 8.5 8.5 8.5 8.5 8.5 8.5 8.5 8.5 8.5 8.5
2018 8.5 8.5 8.5 8.5 8.5 8.5 8.5 8.5 n/a n/a n/a n/a
M1 (end-period; % change, year on year)
2016 9.9 9.8 9.2 7.3 5.4 8.8 10.2 7.0 7.6 11.8 12.7 11.6
2017 13.2 13.0 12.2 11.2 11.2 8.8 n/a n/a n/a n/a n/a n/a
2018 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
M2 (end-period; % change, year on year)
2016 10.5 9.4 7.7 9.0 9.2 8.7 9.7 8.4 8.9 9.2 8.0 9.1
2017 9.2 9.5 9.6 8.8 9.6 n/a n/a n/a n/a n/a n/a n/a
2018 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
Consumer prices (av; % change, year on year)
2016 0.4 -0.5 0.8 0.1 0.8 1.2 0.9 0.8 0.9 1.5 2.2 2.3
2017 1.7 1.2 1.3 3.0 5.9 6.4 5.4 4.7 3.5 3.4 3.6 4.2
2018 6.3 7.0 6.6 3.7 2.5 1.0 1.7 0.9 1.9 n/a n/a n/a
Foreign reserves excl gold (US$ m)
2016 3,986 4,030 4,107 4,124 4,180 4,261 4,280 4,289 4,357 4,298 4,388 4,504
2017 4,447 4,444 4,505 4,639 4,653 4,764 4,787 4,875 4,971 4,999 5,199 5,466
2018 5,570 5,671 5,714 5,744 5,926 6,169 6,019 6,125 n/a n/a n/a n/a
Sources: IMF, International Financial Statistics; Haver Analytics; Bank of Mauritius.
Basic data
Land area
2,040 sq km (1,865 sq km excl islands of Rodrigues, Agalega and St Brandon)
Population
1.26m (Statistics Mauritius, 2017)
Main towns
Population in '000 (2013 World Gazetteer calculation)
Port Louis (capital): 160.1
Beau Bassin-Rose Hill: 112.9
Vacoas-Phoenix: 108.7
Curepipe: 85.7
Quatre Bornes: 82.4
Climate
Subtropical
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; MRs33.9:US$1 (2018 average estimate)
Fiscal year
From 2010 to 2014 the fiscal year was the same as the calendar year but with the budget presented
in March 2015, the authorities switched back to a July-June fiscal 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 Shivaratree (February-March);
Chinese Spring Festival (February-March); Ougadi (March-April); Eid al-Fitr (July); Ganesh
Chaturthi (September); Diwali (October-November)
Political structure
Official name
Republic of Mauritius
Form of state
Country Report 4th Quarter 2018 www.eiu.com © Economist Intelligence Unit Limited 2018
Mauritius 18
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" (current parliament has seven best losers)
Elections
The most recent general election was held on December 10th 2014; the next general election is due
in 2019
Head of state
President, elected by a simple majority of the National Assembly; following Ameenah Gurib-
Fakim's resignation in March 2018, the vice-president, Paramasivum Pillay Vyapoory, has
temporarily taken up the post
National government
Council of Ministers appointed and headed by the prime minister; a new cabinet was appointed
following the December 2014 legislative election; a new prime minister was named in January 2017
Key ministers
Prime minister, home affairs, finance, economic development, national development unit & external
communications Pravind Jugnauth
Deputy prime minister, energy & public utilities: Ivan Leslie Collendavelloo
Vice-prime minister, housing & lands: Fazila Jeewa-Daureeawoo
Agro-industry & food security: Mahen Kumar Seeruttun
Attorney-general: Maneesh Gobin
Business, enterprise & co-operatives: Soomilduth Bholah
Civil service & administrative reforms: Marie Ciryl Eddy Boissézon
Education & human resources, tertiary education & scientific research: Leela Devi Dookun-
Luchoomun
Financial services, good governance, & institutional reforms: Dharmendar Sesungkur
Foreign affairs, regional integration & international trade: Seetanah Lutchmeenaraidoo
Health & quality of life: Mohammad Anwar Husnoo
Industry, commerce & consumer protection: Ashit Kumar Gungah
Labour, industrial relations & employment: Soodesh Satkam Callichurn
Mentor, defence & for Rodrigues: Sir Anerood Jugnauth
Ocean economy, marine resources, fisheries, shipping & outer islands: Premdut Koonjoo
Tourism: Anil Kumarsingh Gayan
Country Report 4th Quarter 2018 www.eiu.com © Economist Intelligence Unit Limited 2018
Mauritius 19
Recent analysis
Generated on December 31st 2018
The following articles have been written in response to events occurring since our most recent forecast was
released, and indicate how we expect these events to affect our next forecast.
Politics
Forecast updates
US launches hawkish new Africa engagement strategy
December 17, 2018: International relations
Event
On December 13th John Bolton, the US national security adviser, unveiled a new strategy that
emphatically pursues US economic, security and political interests in Africa and challenges
Russian and Chinese measures to increase their influence on the continent.
Analysis
Africa could be experiencing a return to the sort of competition among the great powers that
characterised the second half of the 20th century, after Mr Bolton publicly outlined the US's new
emphasis on actively competing with China and Russia to build influence there. Mr Bolton
accused them of seeking to undermine US economic interests in Africa and warned that their
efforts to develop economic, political and security partnerships with African states had already
led to corruption, violence and unsustainable levels of debt on the continent.
The administration's new strategy for Africa, which Mr Bolton outlined in a speech to the Heritage
Foundation, a conservative US think-tank, comes after the US president, Donald Trump, had
given several signs that his administration envisages a new era of global competition with Russia
and China. In Africa this has included facilitating private-sector capital investment in developing
African countries under the US's Better Utilisation of Investment Leading to Development
(BUILD) Act, which will help developing countries to prosper while advancing US foreign-policy
interests, and reducing the deployment of US troops on the continent in favour of greater
surveillance by drones and air strikes against regional terrorist groups.
Mr Bolton also emphasised that in future the US would not give aid to countries that vote against
US interests in international forums or take other actions contrary to US foreign policy. He also
criticised US financial support for peacekeeping operations in countries such as South Sudan,
where a civil war is currently being fought, and said that the US plans to reconsider the assistance
it provides to "unproductive" overseas peacekeeping operations. Africa remains a low priority for
US policymakers, who see it mainly through the lens of competition with Russia and China.
The US administration is clearly seeking narrower approach to dealing with African countries on
issues such as counter-terrorism and trade, compared with the previous that emphasised good
governance, human rights and sustainable development.
Economy
Forecast updates
Public debt rises
November 20, 2018: Fiscal policy outlook
Event
According to data released by the Ministry of Finance and Economic Development, public debt
increased from MRs292.5bn (US$8.6bn) to MRs307.3bn between September 2017 and September
2018.
Analysis
The main driver of the rise in public debt is government borrowing to bail out investors in a
MRs25bn Ponzi scheme (whereby money was paid out to investors from incoming funds rather
than actual returns on investments, leading to its eventual collapse), at the Bramer Bank
Corporation (BBC), which is a subsidiary of Kenyan-based British American Investment
Company. The government took over the management of the property owned by the BBC and
created a new bank to service BBC's existing clients, after the latter's banking licence was revoked
in 2015. In addition, an increase in government borrowing to repay bonds that have reached
maturity, such as the benchmark five-year bond of MRs3.9bn, which matured in October 2018, is
likely to have driven up public debt.
Mauritius relies heavily on shortterm debt—a situation aggravated by sluggish export growth
and rising international oil prices. Indeed, the short-term debt stock of the State Trading
Corporation, which imports the bulk of the country's oil, increased by about MRs312m, owing to
higher imported prices of petroleum products in the third quarter of 2018. Debt accumulated by
parastatal utility companies adds to the total stock of public debt. Although public external debt
fell slightly in September 2018, compared with the corresponding period of 2017, it remains high,
with significant borrowing from India and China, which could weaken Mauritius's negotiating
power on trade issues.
The upward trend in public debt can be explained by the populist agenda followed by the
government since the last general election in 2014, under which social spending has been
generous, although limited measures to enhance revenue have been implemented. We expect the
government to maintain a relatively expansionary fiscal stance and a long-held populist position
over the forecast period (2019-23), particularly before the general election, which is due in 2019.
As the government holds back on implementing unpopular tax reforms, and current expenditure
and infrastructure spending programmes remain high, the fiscal account will remain in deficit, and
the shortfalls will be financed by further borrowing.
Event
The foreign affairs, regional integration and international trade minister for Mauritius, Seetanah
Lutchmeenaraidoo, has announced that the country's negotiations on a Comprehensive Economic
Partnership Agreement (CECPA) with India have reached the final stage, and the agreement is
expected to be signed in January 2019.
Analysis
This trade agreement with India was initiated in 2005, but discussions have stalled several times
owing to the contentious double-tax-avoidance agreement (DTAA) between the two countries.
Under the DTAA, Mauritius-registered businesses do not have to pay any capital gains tax (CGT)
on their sale of assets in India, as the island nation does not have a CGT. However, this raised
suspicions that Indians were routing money through Mauritius to avoid paying tax. The DTAA
treaty was then revised in 2016 and paved the way to restart the negotiation on CECPA, which
includes trade in goods and services, investment and economic co-operation.
The CECPA agreement will provide Mauritius with significant business opportunities, specifically
the manufacturing sector, which has been negatively affected by modest economic performance
among Mauritius's main trading partners (the US, the UK and France). In particular, the
preferential trade agreement would allow Mauritius to export textile and marine products to India
duty free or at a very low import tax and help bolster Mauritius's stagnant textile and expanding
marine industries through access to India's growing population.
India, however, does not stand to gain much from this agreement in terms of trade with Mauritius,
as India's exports to Mauritius in the past year were worth US$1.07bn while its imports amounted
to only US$20.6m. However, India will benefit from Mauritius' strategic geographic position, which
would allow it to expand into the African market by increasing re-exports from Mauritius, mainly
as Mauritius is a part of the Tripartite Free-Trade Area (TFTA) agreement with other African
countries. The TFTA includes 26 member states, which together represent a market of 625m
people and a cumulative GDP exceeding US$1.5trn. Moreover, this is in line with India's efforts to
expand its economic and diplomatic footprint in Africa; the country has pressed ahead with
efforts to bolster trade links with African countries, partly owing to their strategic importance, and
partly owing to resource availability on the continent.
Event
Fears that low-priced synthetic diamonds will undercut the value of natural stones in global
markets are receding, after the first release of branded artificial stones by the De Beers Group
(under the name Lightbox Jewelry) has seen the prices of laboratory-grown gems in the US fall by
as much as 30% since September 2018.
Analysis
This is particularly good news for major diamond producing and exporting African states that are
part of the Kimberley Process (KP, a certification scheme aimed at preventing "conflict diamonds"
from entering the mainstream rough diamond market), such as Botswana, whose economy
continues to remain heavily mineral-dependent, and where economic growth still fluctuates in line
with external demand and prices for diamonds. Sales of natural stones in Botswana were growing
strongly at the end of the third quarter of 2018, after a sluggish first two quarters. Exports of
Botswana-produced diamonds reached P8.8bn (US$833m) in the first quarter, P7.5bn in the second
and P11.9bn in the third, which ended on September 30th. Botswana and De Beers are set to start
negotiations on a fresh sales and marketing agreement to succeed the current one that lapses in
2020. However, De Beers says that it has held extensive consultations with Botswana on the issue
of lab-grown diamonds and the country supports the group's move into the synthetic market.
Synthetic producers have long marketed their artificial stones as akin to natural ones in the US,
while pricing them at a discount to natural diamonds. Now De Beers, which produces the most
advanced artificial stones on the market, is creating a bigger price gap between mined and lab-
grown diamonds by selling its Lightbox Jewelry stones at below-market rates for synthetics, while
continuing to sell its natural diamonds at a premium. The group also shows no signs of winding
down its involvement in natural diamond production now that it has begun sales of artificial
stones. Indeed, De Beers is known to be investing up to US$15bn in expansion projects for its
natural diamond businesses in the KP member states Namibia, Botswana and South Africa over
the next few years.
Event
Kenya ranks fifth in Sub-Saharan Africa for e-commerce readiness, according to the latest
business-to-consumer e-commerce index published by the United Nations Conference on Trade
and Development (UNCTAD) on December 10th.
Analysis
The rankings, based on 2017 data and released at UNCTAD's Africa e-commerce week, held in the
Kenyan capital, Nairobi, place Mauritius, Nigeria, South Africa and Ghana in the first four slots,
with Kenya in fifth and Uganda in sixth. Of the four components of the index, Kenya ranks
strongly (second behind Mauritius) for the share of individuals with an e-commerce account
(82%) and has an average rating for the share of individuals using the internet, but lags behind on
secure internet servers, which increases the risk of cybercrime, and the reliability of postal
services. Of the leading regional countries, Kenya, Ghana and Nigeria showed the biggest
improvement between 2016 and 2017, helped in Nigeria's case by an overhaul of the postal service.
Sub-Saharan Africa continues to trail in the global league, with Mauritius in 55th place and Kenya
Country Report 4th Quarter 2018 www.eiu.com © Economist Intelligence Unit Limited 2018
Mauritius 24
in 89th (out of 151 countries), but the region made faster gains in all four index components than
the global average in 2011-17.
In terms of actual e-commerce, Kenya ranks in third place (behind Mauritius and Namibia) in the
proportion of individuals shopping online (9.3%), one place ahead of South Africa (7.9%). Kenya
also has the region's third largest number of online shoppers (2.61m), behind South Africa (2.93m)
and Nigeria (about 4m). The three together account for almost half of the region's internet
shoppers. Regional growth in shopper numbers of 18% a year on average since 2014—with Kenya
being one of the fastest risers—exceeds the global average of 12%. Nonetheless, the value of
regional e-commerce remains very small, at about US$5.7bn in 2017, equivalent to less than 0.5%
of GDP, compared to a global average exceeding 4%. Faster growth in e-commerce will require
deeper internet penetration and greater trust by users in the safety of e-shopping. Kenya also
requires improvements in the postal service—perhaps, like Nigeria, via a new addressing system
—although the growth of privatesector delivery firms is helping to fill the gap. Illustrating this,
Carrefour, a French retailer, will use Jumia, Kenya's leading e-commerce platform, to deliver online
orders from its six Nairobi stores, starting in January.
Analysis
Impact of US BUILD Act on Sub-Saharan Africa
November 22, 2018
On October 5th 2018 the US Senate passed the Better Utilization of Investments Leading to
Development (BUILD) bill, which aims to facilitate private-sector capital investment in
developing countries. Once signed by the president, Donald Trump, the act will create a
development agency, the International Development Finance Corporation (USIDFC), which will
have an investment cap of US$60bn. The USIDFC will be able to provide loans, equity, insurance,
grants and technical assistance to private-sector entities investing in developing countries
around the world. Additional financing will be welcome in Africa, where inadequate
infrastructure remains a major obstacles to faster economic growth. The African Development
Bank estimates that the continent's funding gap for infrastructure is as much as US$87m to
US$112m annually.
The USIDFC will be an integrated one-stop shop for private-sector investment, by combining
various existing development finance entities, such as the Overseas Private Investment
Corporation (OPIC) and the private capital functions of USAID. The US government has in effect
Africa overall
Despite some encouraging local progress in the telecommunications sector over the past two
decades, Africa as a whole still lags behind other parts of the world in terms of new infrastructure.
In some countries, such as Rwanda and Ethiopia, which have strong governments that inspired
confidence among global investors, private-sector investment in infrastructure has increased over
the past few years. But across Africa, further reforms will need to be undertaken to improve the
investment climate for infrastructure development. All African governments ought to seek to
promote investment by continuing to reform their SOEs so that they can be privatised, or to
collaborate with potential investors to secure long-term investment. In the meantime, development
finance institutions like the USIDFC should step in to provide funding and direction for regional
development.
However, US aid will be spread across the whole continent (and elsewhere) during the course of
the USIDFC's 20-year mandate (which will end in 2038), so it is important to realise that the
USIDFC will not by itself be sufficient to enable Sub-Saharan African governments to close the
infrastructure gap that has opened up between themselves and other parts of the world. The
BUILD Act is also a direct response to China's Belt and Road Initiative, so its funds may be
targeted at those countries that are most geopolitically important to the US and China (such as
Djibouti and Ethiopia), rather than where the money is needed most. However, China is also
present in many African countries, from Botswana to Eritrea, and this will encourage the US to
expand its aid development presence in those countries too.
Concerns over Chinese influence also spurred the European Commission to launch its own
version of the BUILD Act on September 19th, the so-called Connectivity Strategy. This will aim to
give developing countries a "credible and sustainable alternative offer for connectivity financing"
to candidate countries that emphasize sustainable development and labour rights. The growth of
"aid competition" between the great powers will not resolve all of Sub-Saharan Africa's
development issues over the next two decades, but we expect that it will make it easier for them to
grow their economies until they become attractive destinations for foreign direct investment in
their own right.