The SBM Group has published a new edition of SBM insights®, as it proudly moves to expand and strengthen its engagement with its stakeholders. This economic newsletter aims to set out its current views and forecasts for the Mauritian economy, following the latest developments.
The global economy
The latest indications are that the global economy is maintaining its recovery course. However, there are signs that momentum has weakened in recent months in a pandemic environment – including the rapid spread of variants – high inflationary pressures, persistent supply chain bottlenecks, and acute vulnerabilities in international financial markets.
The Mauritian economy
According to the group’s analysts, over the past two years, the Mauritian economy has demonstrated its resilience in the volatile environment caused by the impact of the pandemic on its real, financial, fiscal, and external sectors. Indeed, it has capitalized on its strong fundamentals, its diversified economic space, the significant support measures put in place by the authorities and the sustained progress in immunization. Currently, there are signs that Mauritius is in the process of economic recovery, but vigilance is required, particularly in light of the dynamic health environment, as any emergence and spread of new variants of concern that escape vaccines may, ceteris paribus, pose a threat to domestic economic activities in the periods to come. A key challenge for Mauritius is to strengthen the medium-term recovery momentum and ensure that the country’s transition to sustainable growth is not interrupted. In the same vein, there is a need to decide on the right time to phase out stimulus measures so as not to disrupt the momentum of the economic recovery while continuing to address health priorities, the bulletin said.
Estimated growth rate for 2021
GDP growth is estimated at 4.3 percent in 2021, according to analyst calculations. Overall, economic growth would be driven by a relative recovery in several sectors that had contracted in 2020.
Macroeconomic outlook for 2022
Although there is still significant uncertainty about the evolution of the virus and inflationary pressures are affecting economic activities, the country’s recovery momentum is expected to accelerate this year as Mauritius recovers from the pandemic-induced crisis. Analysts estimate real GDP growth to be between 6.6 percent and 6.8 percent in 2022. In addition to a still favorable statistical base, economic growth would be supported by a further improvement in household and business confidence, leading to a continued recovery in sectoral activities and investment. In essence, analysts are cautiously optimistic about the outlook for this year, provided that (i) the somewhat disrupted global economic recovery maintains its overall course in the face of persistent risks and challenges; and (ii) the pandemic is effectively addressed locally and across borders.
Real GDP growth would be driven by an anticipated significant rebound in tourist arrivals, given the very low baseline and the assumption of a relatively manageable and containable health environment, as well as keeping the country’s borders open throughout the year. That said, the performance of the tourism industry in 2022 may not be optimal compared to pre-pandemic trends. Another key driver of GDP growth is the construction sector, which, despite rising operating costs and a lack of visibility in the economic and health landscape, is expected to show a notable growth rate in light of ongoing and upcoming projects in both the public and private sectors. Against the backdrop of promising order books according to operators, key export-oriented manufacturing segments are expected to show appreciable expansion paths, mainly due to strengthening external demand, while the currency dynamics could also help. Business and financial services and ICT industries are expected to strengthen their growth momentum, thanks to a more favorable business environment and growth in domestic economic activities, it says.
Among the trends observed in the report:
- Unemployment: Analysts expect the national unemployment rate to improve overall and continue to decline in 2022. This is based on the basic assumption that the economy would pick up and investment would be gradually revived in the coming periods, particularly in the wake of the many measures announced by the authorities to revive the economy and boost employment prospects.
- Inflation: ‘Headline inflation’ is estimated to hover around 4 percent in December 2022 in the absence of major shocks. In general, while remaining manageable, pressures on the consumer price index are – as would be the case on the global stage – likely to persist throughout 2022 on the basis of exogenous factors, but should gradually dissipate in the second half of the year. That said, the near-term inflation outlook remains somewhat unclear, as risks from the unstable international landscape are likely to persist for some time. In particular, major uncertainties remain regarding (i) the evolution of international commodity prices and (ii) the time needed for global shipping shortages to stabilize and supply chain constraints to be satisfactorily resolved.
- The External Plan: Despite the recovery in merchandise exports, analysts note that the trade balance deficit is expected to continue to widen in 2022 due to an increase in imports, attributable in part to the continued expansion of economic activities and increased capital investment. With respect to the current account deficit, a relative improvement is expected in 2022, thanks to a recovery in goods exports and accelerating tourist arrivals. A marginal surplus in the balance of payments is expected this year, helped by an improved capital inflow situation in terms of FDI and receipt of external loans by the government.
