The prognosis for economic growth in 2022 by the statistics office of Mauritius was raised on Thursday from a prior prediction of 7.2% to 7.8%. The island nation of East Africa experienced 3.5% economic growth in 2021.
A diversified developing economy, Mauritius’s economy is built on agriculture, exports, financial services, and tourism. The Mauritius government has been working to diversify the economy of the nation since the 1980s in order to reduce reliance on agriculture, notably sugar production.
Meanwhile, the central bank of Mauritius has maintained a forecast of gross domestic product growth above 7 percent for 2022 and 5 percent for 2023 in Mauritius, after the 5th Monetary Policy Committee meeting on Wednesday.
The Bank of Mauritius maintains its optimism for the tourism-led economic recovery and at the same time raised its policy rate to 4.5 percent to counter inflation, which has been rising since the beginning of the year.
In its last report, the central bank noted that “while economies around the world are experiencing a slowdown in economic activities, the Mauritian economy continues to recover”.
The domestic economic recovery has progressed well, supported by greater dynamism in key sectors of the economy. The services sector strengthened further in the second quarter of 2022, supported by the strength of tourism, with positive spillovers to other areas of the economy.
“This week, the Tourism Board announced that Mauritius welcomed 870,000 tourists from January to the end of November and bookings for the tourism sector show that tourist arrivals are expected to grow further due to the peak season. The target of one million tourists set by the authorities remains achievable,” the bank said. “The manufacturing, financial services, construction, and wholesale and retail sectors continue to maintain good momentum and the outlook is promising for the future.”
The recovery in economic activity has had a positive impact on the labour market. The unemployment rate has fallen further from 8.7 percent in Q1 2022 to 8.1 percent in Q2 2022. Labour market conditions are expected to continue to improve and approach pre-pandemic levels as overall economic activity continues to recover.
The downside to this picture is inflation, which is mainly driven by external factors, due to a mix of international and domestic factors. However, “the banking sector continues to be resilient, strong and prosperous”, the central bank said.
Nevertheless, the Bank of Mauritius calls for vigilance on the potential effects that further tightening policies by the U.S. Federal Reserve and the European Central Bank could have on yield spreads. “These could create pressure on the local currency, if left unchecked, and could generate further inflationary pressures.”