(helped by the recovery in the tourism sector and our exit from the FATF grey list )
Mauritius's credit profile reflects its relatively high debt burden, as well as its small size and exposure to shocks, set against a business-friendly investment environment, which has historically supported relatively high and stable growth rates. Robust governance and institutions help attenuate Mauritius's exposure to environmental risks, particularly natural capital risks and susceptibility to weather-related events.
Rating outlook
The negative rating outlook reflects the mutually reinforcing risks from a slower recovery in the tourism sector than we currently expect, with spillovers to the rest of the economy, which would exacerbate the erosion of fiscal strength. The negative outlook also captures the risks associated with some of the coronavirus pandemic-related policy measures, and in particular very large financing of the 2021 budget deficit by the central bank, which increases the risks to the effectiveness of monetary policy.
Factors that could lead to a downgrade
A continued deterioration in debt metrics, beyond our current expectations, would likely lead to a downgrade. This may be consistent with weaker fiscal policy effectiveness. Furthermore, weakening monetary policy effectiveness as demonstrated by rising inflationary risks would also likely result in a downgrade. An increase in domestic or external imbalances, as reflected in an increase in price and exchange-rate volatility, accompanied by a deterioration in the country’s balance of payments position, could also lead to a downgrade.
Note:
Moody' Long-Term Rating Definitions
Aaa
Obligations rated Aaa are judged to be of the highest quality, with minimal risk.
Aa
Obligations rated Aa are judged to be of high quality and are subject to
very low credit risk.
A
Obligations rated A are considered upper-medium-grade and are subject to low credit risk.
Baa
Obligations rated Baa are subject to moderate credit risk. They are considered medium-grade and as such may possess speculative characteristics.
Ba
Obligations rated Ba are judged to have speculative elements and are
subject to substantial credit risk.
B
Obligations rated B are considered speculative and are subject to high
credit risk.
Caa
Obligations rated Caa are judged to be of poor standing and are
subject to very high credit risk.
Ca
Obligations rated Ca are highly speculative and are likely in, or very near,
default, with some prospect of recovery in principal and interest.
C
Obligations rated C are the lowest-rated class of bonds and are typically in default, with little prospect for recovery of principal and interest.
Moody's appends numerical modifiers 1, 2, and 3 to each generic rating classification from A through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating categories.
