Introduction
After registering a growth of 7.7% and 15.9% in Q1 and Q2, respectively, the Mauritian economy continues to show signals of recovery in FY23. Higher tourist arrivals, resulting spill over into various aggregate demand indicators and push to the construction sector due to ongoing infrastructure development projects are the positive developments for the growth. Central Bank of Mauritius continues to maintained its growth projections above 7% for 2022.
Prices Continue to Remain Elevated
Inflation measured by the consumer price index (CPI) increased to 11.9 % y-o-y in October 2022, marking a consecutive rise for the fourth month. Though core inflation (which excludes food, beverages, tobacco, mortgage interest, energy and administered prices) moderated slightly to 7.5 % y-o-y. The Producer Price Index (PPI) for the manufacturing sector remained elevated at around 20% y-o-y in September, although on a sequential basis PPI eased marginally. Moving ahead inflationary pressures are expected to subside in 2023 because of the combined effects of monetary tightening, reduction in international supply-demand mismatches, normalisation of commodity prices globally and favourable base effects.
Inflation Continues on Upward Trend
Source: CEIC; Note: Core inflation denotes data for category Core 2
Monetary Tightening Continues
The Monetary Policy Committee of the Bank of Mauritius unanimously decided to raise the Key Repo Rate (KRR) by 100 bps at its November 2022 meeting, to close the US interest rate differential and bring confidence in the foreign exchange market. This fourth successive rate hike took the key repo rate to 4.0% and the cumulative rate hike by MPC since the beginning of the year stood at 215 bps points. The MPC also said that a rate hike would help in taming inflation expectations in the economy. The central bank also brought down its inflation projections to 9.5% for 2022. The Bank of Mauritius projected inflation in 2023 to remain in the range of 5-6%.
Trade Deficit Continues to Widen
In September 2022, the total merchandise exports were MUR 7.9 billion, recording a 19.1% (y-o-y) growth. Sequentially, it has risen by 11.3% (m-o-m), after recording a fall in the previous month. At MUR 27.4 billion, imports recorded a growth of 41.6% (y-o-y) due to a low base and 7.4% growth on a sequential basis (m-o-m). Consequently, the trade deficit during the month widened to MUR 19.5 billion from MUR 18.5 billion in the previous month. The top five export destinations of Mauritius were South Africa, the US, France, Madagascar and the UK and the top five import partners were China, Oman, India, South Africa and France.
Biggest Fall in Reserves Since April 2022
The central bank has been trying to dampen the currency volatility by drawing down forex reserves. The gross official international reserves fell sharply in October 2022 to MUR 286.8 billion, lower by MUR 42.2 billion compared with the previous month. The deployment of reserves in order stabilises the currency is one of the reasons behind the deceleration in forex reserves. As a result, after reaching a record low of 45.61 per USD in July 2022, the Mauritian Rupee has strengthened by 1.6% in the last three months. During the 12 months that ended November 2022, the currency has weakened by 2% against the USD.
Currency Stabilises amid Fall in Reserves
Source: CEIC
Tourism Sector Continues to Surge
The tourism sector continued to be the silver lining in the Mauritian economy. A total of 755,655 tourists have visited the island country since the beginning of this year up to October 2022. The number of tourist arrivals in October this year was almost 116% higher compared to October last year when borders were opened for the first time after pandemic. The proliferation in tourist arrivals continues to boost the gross tourism earnings, which stood at MUR 5.9 billion in August 2022 as against MUR 0.5 billion in the corresponding month of the previous year. The recovery in the tourism sector has had significant spillover effects on the other sectors of the economy and this impetus is set to continue through the last two quarters of the financial year.
Tourism Sector Continues to Thrive
Source: CEIC; Bank of Mauritius
Conclusion
Continuous growth in tourist arrival and gross tourism earnings are positive developments that will support growth in Mauritius amid global uncertainty. But going forward, the Mauritian economy needs to be cautious of the elevated inflationary pressures from external events and spillover effect of the monetary tightening across the globe.
Monthly Data of key Economic Indicators – 2022
| Indicators | Unit | May | Jun | Jul | Aug | Sep | Oct |
| CPI Inflation | y-o-y% | 10.7 | 9.6 | 11.0 | 11.5 | 11.9 | 11.9 |
| Core Inflation | y-o-y% | 7.9 | 8.2 | 8.3 | 8.3 | 7.8 | 7.5 |
| Key Repo Rate | % | 2.00 | 2.25 | 2.25 | 2.25 | 3.0 | 4.0 |
| Exports | MUR Bn | 6.2 | 7.3 | 7.3 | 7.1 | 7.9 | – |
| Imports | MUR Bn | 24.1 | 28.7 | 24.2 | 25.5 | 27.4 | – |
| Trade Balance | MUR Bn | -17.9 | -21.5 | -17 | -18.5 | -19.5 | – |
| Exchange Rate | USD/MUR | 43.6 | 44.7 | 45.6 | 45.5 | 45.2 | 44.9 |
| Gross Official International Reserves | MUR Bn | 307.3 | 346.0 | 316.6 | 316.9 | 329.1 | 286.8 |
| Import cover | No. of months | 14.5 | 16.3 | 14.9 | 15.0 | 15.5 | 13.5 |
| Tourist Arrivals | Person | 70,462 | 63,008 | 94,084 | 86,605 | 81,087 | 117,323 |
| Gross Tourism Earnings | MUR Bn | 4.3 | 4.1 | 5.1 | 5.9 | – | – |
Source: CEIC; Note: Core inflation denotes data for category Core 2; MUR=Mauritian Rupee
