The latest IMF World Economic Outlook expects global output growth to amount to 2.7 percent, with a 25 percent probability of decreasing below 2 percent. More than a third of the world economy is expected to contract with the three largest economies- USA, EU, and China-expected to stall. Global trade for the year 2023 is expected to worsen due to lower economic growth, high prices of trade goods, and debt sustainability. Moreover, geopolitical frictions, persisting inflation, and lower demand are elements that can hinder the 2023 global trend. World Inflation for the year 2023 is expected to subdue to 6.5 percent from 8.8 percent for the year. World Investment as a percentage of GDP for 2023 is projected at 27.8, like in 2022.
For Mauritius, the Bank of Mauritius forecasts a 5 percent growth for 2023. In contrast to many countries, the estimated growth rate for Mauritius is promising, with an almost two-fold growth compared to the projected world growth rate of 2.7 percent (WEO October 2022, IMF).
The IMF in its latest World Economic Outlook report revised its forecast for growth in global output to 3.2 percent. At the start of the year, it was predicted to be 4.4 percent. The moderation of growth expectations was largely influenced by the invasion of Ukraine, which had a snowball effect on commodity prices, affecting real incomes and in fine dampening consumer activity. In addition, a marked slowdown in China, explained to some extent by the now relaxed zero covid policy, further thwarted the post covid recovery process. Moreover, interest rate increases in various economies coupled with rising inflation have dampened project feasibilities.
Mauritius has faced numerous challenges during 2022 because of the prevailing global economic conditions, mostly due to supply chain disruptions, higher freight costs, a stronger US dollar and soaring energy and other commodity prices. In its latest release of national account estimates (December 2022), Statistics Mauritius expects a growth rate of 7.8 percent growth, which will leave GDP above pre-pandemic levels in terms of GDP.
A strong rise in exports of goods and services will reach Rs. 314 billion in 2022 exceeding the figures of 2019. Exports of goods are driven by growth in exports of textiles, sugar, and medical devices amongst others as operators maximize the opportunities obtained under recently signed agreements with China, India, and the African continent. In fact, exports of goods will reach Rs. 100 billion in 2022. Re-exports and proceeds from ships stores and bunkering activities are on a positive momentum as well. Exports of services are on the other hand recovering strongly, benefitting from the re-opening of borders, which will lead to tourist arrivals reaching almost 1 million in 2022. In addition, tourists are spending more and staying longer.
An acceleration in the realization of investment projects, both in the public and private sectors is further fueling growth. Expected FDI for the year will be around Rs 25 billion, surpassing its pre-pandemic figures. Investment, as measured by GFCF, is anticipated to grow by 6.3 percent for the year with private sector investment to be at Rs. 88.7 billion, a growth of 7.9 percent while public sector investment is projected at Rs. 22 billion, an increase of 0.5 percent.
One of the main challenges has been the preservation of the purchasing power of Mauritians. Against the rising tide of inflationary pressures, the Bank of Mauritius has reviewed the Repo Rate to 4.50 percent compared to 1.85 percent in December 2021. In November 2022, headline inflation accelerated to 10.3 percent compared to 4 percent in November 2021. The Government has also intervened massively in terms of income support and other remedial measures to ensure that the adverse impact of rising prices does not affect the quality of life of Mauritians.
