Country Profile: MAURITIUS

Southern Africa

Monday, 23 November 2009 00:00

This country profile was published in November 2009 in our annual 'Africa in 2010' issue. The next edition, 'Africa in 2011' will be on sale in November 2010.

A country that is universally recognised as well-governed, democratic and stable, Mauritius has been hit hard by the economic slowdown, but its prospects for 2010 show some signs of improvement. Economic growth in 2008 was over 6%, and the forecast for 2009 is 2.1% with no rebound in sight until at least after 2010 when growth is expected to remain at 2%. However, two key elements of the country’s economic structure – tourism and textile exports – have been particularly hard hit, and there is some uncertainty over the financial services sector too, although the recently restructured sugar industry has largely been able to weather the storm. 

Following several years of expansion, the tourism sector was particularly hard hit by a sharp fall in the number of visitors through the normally high-season months of February and March. Over the whole of 2009, tourist arrivals were expected to be down by around 10%. This has had knock-on effects on new investment and the construction industry. Plans to raise tourist arrivals to more than 1m visitors per year, and eventually to 2m per year, now seem unrealistic. Hotels and the national airline, Air Mauritius, have had to revise major expansion projects.  Elsewhere, the textile sector’s output was down by a small percentage, and secondary impacts of the economic downturn were felt in banking and in shipping. These impacts may continue to be felt for some time. 

Mauritius The better story is the sugar industry where, thanks to good weather and wise investments, there is a forecast output of 490,000 tonnes for 2009, up 8% on the previous year. Productivity has generally improved, providing an indication that recent reforms have had a positive impact. There are prospects of industry-wide rationalisation, including mergers between some of the bigger players. 

The central bank has been upbeat about the banking sector, as banks were not exposed to toxic assets and are well-capitalised and  profitable; it has also claimed that public finances are sound and that foreign reserves remain at a comfortable level. The central bank has, however, admitted that further uncertainties in the world economy could spread the impact beyond tourism and textiles. Finance minister Rama Sithanen has signalled that the government will continue with its expansionary fiscal policy throughout 2010 and will seek budgetary support loans from both the IMF and the AfDB. 

The governing coalition led by the Labour Party leader, Navin Ramgoolam, will face a general election in 2010 and, in the manner of past electoral swings on the island, could be punished by voter dissatisfaction with economic circumstances, especially if these lead to job losses and high unemployment. Although the two main opposition parties, the Mouvement Socialiste Militant (MSM) and Mouvement Militant Mauricien (MMM), seem to have lost the initiative since they themselves were on the receiving end of the same punishment in 2005, there has been some realignment of the political parties. The MMM  leader, Paul Bérenger, hopes to go into the elections with three small parties rather than in coalition with the MSM as before. The MSM is still in the  process of rebuilding its fortunes. 

The main concerns of the government in its relations with the outside world are to sustain inflows of foreign investment and to forge trade agreements that will benefit the economy over the long term. Of particular interest is the  negotiation of new agreements with both India and China, with a Chinese special economic zone opened in late 2009.