MCB Focus downgrades growth forecast for 2016

Growth figures will be lower than forecast this year, according to the latest edition of the MCB Focus publication by the Mauritius Commercial Group. The economy is now expected to grow at 3.8%, that is 20 basis points lower than initial forecasts published in October. “With regard to 2016, economic growth is likely to remain in sub-par territories.” This figure is in broad consensus with forecasts formulated by Statistics Mauritius and the IMF.

• Growth 3.8% in 2016
• Unemployment to stand at 8%

“Basically, our downgrade has been prompted by the deterioration in global economic prospects and slightly lower projections as regards the evolution of national investment. Subsequently, our view is that a lower expansion in output is anticipated for Q1 and Q2,” write the authors of the publication. The country’s national income should continue expanding at a generally tempered stride. GDP at market prices is forecast to grow from Rs 407 billion in 2015 to Rs 433 billion in 2016. Per capita GDP in rupee terms would post a nominal increase of some 6%, with the growth standing at around 3.5% in real terms. When denominated in US dollars, the figure would edge up by a moderate rate of close to 2% to oscillate around USD 9,360, after accounting for the general strength of the dollar on international markets. Overall, says the report, the growth prognosis for this year is mainly shaped by expectations of mixed outcomes by economic sectors and a temperate expansion in national investment. The share of total investment to GDP, while it had lingered around 25% nearly a decade ago, would stand at around 18% in 2016. “Which is far below the targeted level for the country to successfully accomplish its socio-economic ambitions.” For its part, the gross domestic savings to GDP ratio is likely to increase to around 12.8% in 2016, which, however, remains a worrisome level in line with the restrained national output trajectory, according to the MCB Focus team. While complimenting the efforts made by the government to boost investment through projects, the authors claim that the extent of capital outlays to be incurred will depend on specific major ventures – especially those related to the real estate and property development fields – being actually kicked off. Construction works for key projects that can potentially generate a notable impact on the economy’s real GDP growth performance are anticipated to be executed as from the second half of 2016 and/or onwards, with examples relating to the new Road Decongestion Programme and the Heritage City Project. Given lingering labour market imperfections, unemployment rate should stay quite high at close to 8% this year. “As highlighted in previous editions of the MCB Focus, Mauritius Inc.’s economic growth pathway remains an enduring cause for concern to the extent that it tends to undercut, from a dynamic viewpoint, the nationwide wealth creation capacity of households and enterprises as well as the leeway for sustainable job creation by economic operators.”