Mauritius Anticipates Lower Than Expected Economic Growth

by Lorys Charalambous, Tax-News.com, Cyprus

13 July 2006

The government of Mauritius has announced that the nation's economy will grow at a slower rate in 2006 than initially forecast, as several key sectors of the economy have so far under-performed previous estimates.

The latest information gathered on key sectors and recent past trends show that the economy, which is expected to recover, will probably grow at a lower rate of 4.6% in 2006, the government stated on Tuesday.

This is due to a slight slowdown in four sectors, namely financial intermediation, sugar production, tourism and construction.

According to the government, the financial sector is this year expected to grow by 6.7% (compared with an initial estimate of 7.0%) as a result of slower growth in the commercial banks sector.

Sugar production is expected to reach 530,000 tonnes, lower than the forecast of 550,000 tonnes made earlier in March 2006, mainly attributable to unfavourable climatic conditions prevailing at the beginning of the year.

The government also anticipates lower growth of 6.1% in the hotels and restaurants sector based on tourist arrivals data for the first five months of the year, compared to the 7.8% rate forecasted earlier. Tourist arrivals are now estimated at 810,000 - lower than the previous figure of 825,000.

Meanwhile, the construction sector is expected to grow at a slightly lower rate of 4.8% instead of 5.0%.

However, the latest information available to the government shows that investment in 2006 will rebound after low growth in 2004 which was followed by a contraction in 2005. Investment in 2006 will most likely reach Rs 48,708 million (US$1.57 billion), representing an increase of 23.1% in nominal terms over the 2005 figure of Rs 39,574 million.

The government stated that this high growth rate is mostly explained by an expected investment in aircraft amounting to around Rs 5,290 million by the national aviation company, and Rs125 million by a private company. Exclusive of the acquisition and sale of aircraft, the growth works out to 4.7% in 2006 compared to -2.0% in 2005.

According to the economic indicators, private sector investment would most probably increase by 12.9% to Rs31,223 million in 2006 from Rs27,662 million last year. In real terms, it is expected to post a growth of 7.4% after a decline of 1.5% in 2005, mostly attributable to high investment in hotels and IRS projects and by a new private power producer at Savannah.

Public sector investment is forecast at Rs17,485 million, that is 46.8% higher than the 2005 figure of Rs11.912 million. After removing the price effect, public sector investment is expected to grow by around 39.7%, compared to a decline of 1.5% in 2005.

Recommended