Press Release: IMF Concludes 2013 Article IV Consultation Mission to Mauritius

IMF News, January 30, 2013

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Canonical URL: Press Release: IMF Concludes 2013 Article IV Consultation Mission to Mauritius

An International Monetary Fund (IMF) mission led by Martin Petri visited Port Louis during January 16–30, 2013 to conduct the discussions for the 2013 Article IV consultation with Mauritius.
The mission met with The Honorable Vice Prime Minister and Minister of Finance and Economic Development Xavier-Luc Duval, Governor of the Bank of Mauritius Rundheersing Bheenick, other senior government officials, as well as representatives of the National Assembly, the private sector, and civil society.

“Prudent macroeconomic policies continued in 2012, resulting in good fiscal and inflation outcomes.”
The challenge highlighted for 2013: “to accelerate growth in a still difficult external environment and to set the foundation for future growth, through increased public and private investment and productivity advances.”
Medium-term priority: Continue “medium-term fiscal consolidation” to reduce external imbalances and economic vulnerabilities.

Staff projects that growth in the real gross domestic product in 2013 will increase to 3.7 percent, fueled by strong growth in fishery, information & communications technology, and financial services.
Investment outlook: “Investment is likely to increase, driven by public investment projects, while private investment is expected to remain subdued.”

Current inflation: “At around 4 percent, inflation is low at the moment…”
Risks: “inflationary pressures could emerge in 2013 from wage pressures in the private sector linked to the decision to increase public sector wages and from possible adjustments in some administered prices.”
Mission projection: “headline consumer price index inflation to accelerate to 5.7 percent on average in 2013 and decline thereafter.”
Policy recommendation: “The current monetary policy stance is broadly appropriate, but the authorities should stand ready to tighten monetary conditions if inflation accelerates.”
Real estate and banking sector monitoring: “The developments in the real estate sector should continue to be monitored carefully, both in terms of price and rental growth and with respect to the impact on the banking sector.”
Financial system assessment: “Overall, the banking sector appears robust, and the financial system has proven resilient.”

2013 budget aim: “to support growth and ensure sound macroeconomic management.”
Fiscal projection: “Compared to 2012, the overall fiscal deficit is projected to increase modestly.”
Staff recommendation: Given the need for debt reduction and the likely limited impact of a discretionary fiscal stimulus in a small open economy with a flexible exchange rate regime, “staff would recommend a fully neutral fiscal stance in 2013, similar to the one achieved in 2012.”
Endorsement: “The authorities’ medium-term fiscal consolidation plans are welcome to reduce external imbalances, mitigate debt vulnerabilities and rebuild policy buffers.”

External current account concern: “The persistently large external current account deficit reflects low savings and could give rise to future vulnerabilities.”
Recommended policy directions:
- Promote national savings and foster competitiveness.
- Implement longer-term adjustments to reduce fiscal deficits and to help build human capital and infrastructure.
- Initiate or reinforce policies “soon” and implement them steadfastly, particularly investments and reforms related to public utilities and road decongestion.
Assessment of reform capacity: “In view of Mauritius’ well-established track record as an economic reformer with a dynamic private sector and robust institutions, these challenges appear manageable, but they require renewed effort.”
Note on authorities: “The Mauritian authorities are cognizant of these challenges and have continued their efforts to implement structural reforms to address key growth-impeding bottlenecks.”

The IMF offer: “The IMF stands ready to assist the authorities in the implementation of their economic program, including through the provision of technical assistance, and looks forward to continued fruitful policy dialogue in the period ahead.”

Press Release No. 13/28 — January 30, 2013