Download outlook for the subsequent year for the Mauritian economy

The Mauritius Chamber of Commerce and Industry
Economic Review
2016
The International Context
Policy transitions and uncertainties are continuously shaping the global economic outlook towards modest growth.In 2016, with the world economy
faced by new shocks, subdued demand, and ongoing re-alignments, the IMF expects a slowdown in growth to 3.1 percent.
Negative output gaps and persistently low inflation combined with political discord and inward-looking policies contributed to a fall in growth in
advanced economies from 2.1 percent in 2015 to 1.6 percent in 2016. Compared to the last few years, the United States and the United Kingdom
experienced lower growth rates of 1.6 percent and 1.8 percent respectively. These are largely due to policy uncertainties following the June U.K vote in
favour of Brexit and the election of a new President in the U.S.
In the Euro Area, the recovery seems to stagnate amidst stubbornly low inflation, high unemployment alongside structural weaknesses. The low oil
prices, neutral fiscal policy stance and accommodative monetary policy have nonetheless helped to maintain growth at 1.7 percent. A slight pickup
in activity was observed in Germany, with a growth rate of 1.7 percent in 2016 while France, Italy and Spain continued to show similar growth rates
than 2015.
Growth in the emerging markets is expected to strengthen modestly, with a growth rate of 4.2 percent forecast for 2016, a pace which is nonetheless
well below its pre-crisis average. Whilst China's economic growth continues to fall on the back of structural reforms and further shift in activity from
industry to services, growth in emerging Asia, especially India continues to be resilient, with the latter experiencing a growth rate of 7.6 in 2016. The
country benefited from a large improvement in terms of trade, effective policy actions, and stronger external buffers, which have all helped to boost
economic sentiment.
Elsewhere in the world, Brazil and Russia are starting to show signs of stabilisation as the effects of past shocks and low commodity prices start to
wear-off. Both economies nonetheless remained in recession at 3.3 and 0.8 percent respectively. Activity in the Sub-Saharan Region also continued to
weaken as lower commodity prices are combined with weak domestic conditions and political instability.
Though average global inflation remained benign in 2016,fears of deflation have diminished as the pull from low oil prices subsided. In advanced
economies, a slight increase in consumer prices by 0.8 percent in 2016 was observed while broadly stable exchange rates have held inflation steadily
in emerging and developing economies.
74092,3
75212,7
60048,4
GDP (USD Million)
34555,9
25122,4
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11114,8
Local context 2016
Faced with an uncertain external environment, the Mauritian economy
showed signs of renewed resilience. In 2016, growth rate at basic prices is
expected to be around 3.6 percent according to latest figures from
Statistics Mauritius, much higher than the 3 percent achieved in 2015.
7.0
Economic activity in the country continues to be driven by internal
demand. On the one hand, consumption expenditure grew by 2.9 percent,
higher than the 2.7 percent rate in 2015. Consumption expenditure was
balanced between a 2.9 percent increase in household expenditure and a
3.0 increase in government expenditure.
4.0
On the other hand, investment grew by 5.7 percent after several years of
contraction. Public sector investment expanded by 4.3 percent compared
to 1 percent in 2015. With a recovery of 6.2 percent in 2016, private sector
investment remained the largest driver of investment in the country with 73
percent of total investment by the private sector.
0.0
6.0
5.0
3.0
2.0
1.0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Potential growth rate
Actual growth rate
On the external front, our exports of goods and services were marred by
uncertainties and shocks in our main markets. In 2016, our exports
decreased by 2.4 percent following a fall of 0.7 percent in 2015.
Driven by still low world commodity prices and modest domestic demand,
inflation rate reached its lowest figure since 1986 with a 1 percent rise in prices
while unemployment continued to decrease to reach 7.4 percent in 2016.
For a second consecutive year, the level of business confidence showed
positive signs with a distinct rise over the year 2016 to reach 97.5 percent
– its highest level since 2011. Yet, the MCCI Business Confidence Indicator
remains in static territory, below its long-term average, a sign of continued
uncertainty of entrepreneurs in the country’s economic situation.
385,715
265,214
GDP (Rs million)
107,325
7,389
33,415
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2016
841
The Mauritian economy has made
considerable
progress
since
independence, moving from a GDP
of Rs 841 Million to achieve Rs 385
Billion in 2016. In fact, the country
has been growing at an average of
5.3 percent since 1968. This has
been enabled through a constant
transformation in the country's
economic structure, moving from a
mono-crop economy with a high
reliance on sugar to a diversified
services-oriented economic model.
While growth rates have moderated
during the last few years, the country
continues
to
show
incredible
resilience and dynamism.
Investment
raterate
(%)(%)
17.6
Growth
in investment
(%) (%)
5.7 5.7
Unemployment
rate (%)rate7.4
(%)
1 (%
Investment
17.6
Growth
in investment
Unemployment
(%)Inflation
7.4
Inflation
%) 1
Business Confidence Indicator
100
%
96,7
96,3
101,9
106,5
111
Dynamic Territory
99
100
98,8
99,4
91,6
88,1
85,4
88
87,5
85,1
Static Territory
#
85,3
87,9
82,5
79,6
93,4
89,8
94,2
98
93
97,5
88,1
77,5
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016
The MCCI Business Confidence Indicator summarises, in a single variable, the simultaneous changes of several variables and thus allows an instant
estimate of the morale of entrepreneurs over a short time period.
The Business Confidence Indicator has witnessed a rise over all quarters of 2016, except in the third quarter where a slight fall was observed. The index
settled at 97.5 points in the fourth quarter of 2015, its highest level since 2011. The BCI however remained in static territory below its long-term
average of 100 basis points.
Contribution to GDP (%)
Sectoral growth rates (%)
Real estate activities
Real estate activities
Financial and insurance activities
Financial and insurance activities
Information and communication
Information and communication
Accommodation and
food service activities
Accommodation and
food service
Wholesale and retail trade
Wholesale and retail trade
Construction
Construction
-10
-8
-6
2013
Manufacturing
Manufacturing
Agriculture
Agriculture
-4
-2
2014
0
2
4
2015
Per capita income ($) 9,322.00
6
8
10
2016
0
2013
Growth in exports (%) -2,4
5
2014
10
2015
15
20
2016
Growth in imports (%) 0.8
6.0
70.0
60.0
5.0
4.0
40.0
3.0
30.0
2.0
20.0
World
Advanced economies
Emerging market
and developing economies
Output Growth rate (%)
Share of world total (%)
50.0
Inflation
Trade
World trade volume growth
1.0
10.0
0.0
2012
2013
2014
2015
2016
1.7%
Employment
0.0
World unemployment rate
5.7%
Advanced economies
Share of world total
Emerging market and
developing economies
Share of world total
Major Stock Market Growth (%)
World
Advanced economies
FTSE
NASDAQ
Emerging market and developing economies
1
2
5
4
2.9%
0.7%
4.5%
6
3
14.4
7.5
DOW JONES
NIKKEI
13.4
0.4
1
European Union
Growth
1.9%
Share of world total 16.7%
2
Emerging and
Growth
Developing Europe Share of world total
3
Emerging and
Developing Asia
Growth
6.5%
Share of world total 31.8%
4
Latin America and
the Caribbean
Growth
-0.6%
Share of world total 7.9%
5
Middle East and
North Africa
Growth
Share of world total
3.2%
6.7%
6
Sub-Saharan Africa Growth
Share of world total
1.4%
3%
3.3%
3.3%
Outlook 2017
On the international scene, the economic performance of advanced and developing economies in 2016 remained weak. Looking ahead, the
IMF predicts global economic activity to pick up pace in 2017 and 2018, especially in emerging market and developing economies.
Nonetheless, there are a number of downside risks linked to policy uncertainties concerning the global ramifications of a changing policy
mix by the U.S administration and the triggering of Article 50 to leave the European Union by the U.K.
Amidst a rebound in the world economy, growth in Mauritius is expected to pick-up slightly. Latest IMF estimates point towards a growth of
3.9 percent in 2017.
Higher rates of economic growth in the Mauritian economy will largely depend on a renewal in public and private investment, driven by the
intended kick-start of large-scale projects such as the Metro Express. Moreover, the opening up of life rights to foreign retirees, will likely
further boost consumption expenditure, one of the most critical determinants of economic growth in the country.
Economic Barometer
Future
40
Recovery/Upswing
Upturn/ Boom
- Present economic situation:
still bad but improving
- Economic expectations positive
- Present economic situation:
good
- Economic expectations:
positive
30
20
Q2 2016
10
Q1 2016
-40
-30
-20
-10
Q3 2016
Q4 2016
0
10
20
Current situation
30
40
-10
-20
Cooling down/Downswing
Trough/Recession
- Present economic situation bad
- Economic expectations negative
-30
- Present economic situation:
still good, but deteriorating
- Economic expectations:
negative
-40
The MCCI's latest Economic Barometer shows that the country is now in an Upturn, with a sustained improvement in the current economic
situation over 2016. Entrepreneurs in general remain positive in regards to future prospects for the economy.
Nevertheless, both internal and external risks remain as the country is faced with the combination low domestic demand and persistent
uncertainties in the global economy. Mauritius needs to makes full use of its monetary, fiscal and structural policy levers to sustain its
growth prospect.