Mauritius looking at ways to boost economy

Reuters recently reported that Mauritius is planning a range of fiscal reforms to boost growth after the country cut its growth target due to declining tourism revenues from the crisis-hit euro zone.

Average economic growth over 2012 to 2014 is expected to be about 4% rather than the 5% initially forecast, the finance ministry said earlier last month.

The reforms will look to favour growth, improve welfare and reinforce crisis-prevention systems. Analysts said the reforms were likely to be incentives to encourage local businesses to expand.

The tourism economy generates about 10% of Mauritius’ GDP, and visitors from debt-mired Europe traditionally account for around two thirds of arrivals. Mauritius saw a 7.5% increase in gross tourism receipts in the first half of 2011 to MUR 21.3 billion, according to data released last Thursday. Tourist arrivals rose 5.8% to 439,150, the central statistics office (CSO) said.

Mauritius has pursued an aggressive international marketing campaign since suffering along with other long-haul luxury destinations during the global economic downturn. Its hotels have also offered heavy discounts as it fights to maintain market share.

Tourism revenue for the whole year is forecast to be around MUR 42.5 billion, 7.7% up on 2010. Looking at the breakdown of GDP as per the national accounts estimates published by the CSO, however, hotels and restaurants specifically are forecast to make a 6.9% contribution to GDP in 2011, down from 7.0% in 2010.

First half arrivals from Europe rose by 3.8%, led by a 5.6% rise in French arrivals, and a 5.9% increase in German arrivals. Visitor numbers from Asia, a market the island is increasingly looking to tap, increased by 21.7% and arrivals from China jumped by 53.6%.

The statistics office said the average room occupancy rate for all hotels during the first half of 2011 was 65%, up from 64% a year earlier.

According to Reuters, Chandan Jankee, economic professor at the University of Mauritius, said he expected the reforms to include changes to the tax system favouring those on lower incomes. The statement was the first from the ministry since Charles Gaetan Xavier-luc Duval become finance minister earlier last month in what was viewed as a market-friendly appointment. It looks like he has come on board at a challenging time for the Mauritian economy.

The African Development Bank also concurs with the need for the country to restructure its economy, saying that future overall growth will rely in some part on Mauritius tackling its fiscal and current account deficits, high dependency on traditional export partners, high import-dependence, and relatively poor infrastructure.

Imara is an investment banking and asset management group renowned for its knowledge of African markets.