Published in Mtimes 01 11 2018
According to the Fitch Solutions Macro Research, growth will decelerate in 2019 as a result of the continuous decline in sugar production and the worrying trends in the financial sector.
Amid plunging world sugar prices as a larger than expected supply surplus weighs on the market, the sector will remain in trouble well into 2019, weighing on the manufacturing and agribusiness sectors. As for the GBC sector, it noted that “foreign liabilities held in the system have fallen by 35.2% between April 2018 and July 2018 and we expect that the raising of CGT to Indian levels in April 2019 will see this process accelerate as foreigners lose the advantage of basing capital in Mauritius.”
In light of these developments, Fitch Solutions expect that real growth will fall from 3.7% in 2018 to 3.5% in 2019, before averaging 4.3% up to 2027. Thus growth deceleration will be temporary. Its optimistic scenario of average growth of 4.3% , however, is based on a) ongoing rapid expansion of output in the construction sector, b) a weaker rupee relative to the dollar and the euro c) a pickup in exports of textiles and tourist arrivals from key markets d) increasing opportunities from the FTA with China and the transhipment and financial hub on China's Maritime Silk Road trade route and e) a recovery of the financial services sector from the impact of double tax treaty revisions in the coming year. This promising narrative is not necessarily out of the realm of possibilities but it will be likely to take a longer time to come to fruition.
