Mauritius is likely to suffer a delay in economic recovery, as it experiences a second wave of COVID-19, Fitch Solutions says.
According to the research firm, the imposition of new restrictions and a return to normality being delayed until at least the second half of 2021, suggests that real GDP will trend at 8.5% in 2021. Real GDP growth is forecast to grow by 5.6% in 2022.
Mauritius is among the few African economies to have successfully prevented a large scale of COVID-19 outbreak in 2020, with only 10 deaths throughout the year. However, Mauritius is now battling a second wave of the pandemic.
The country returned to lockdown on March 10, expected to last until end of April or probably beyond. With this recent development, it suggests that private consumption may struggle to pick up within the near term, having declined by an estimated 16.8% in 2020. More so, this also gives limited consideration for flights to resume or for border restrictions to be eased until the second half of the year.
According to Fitch Solutions, although the growth projection has been revised downwards, economic conditions will begin improving more notably in the second half of the year. Fitch Solutions notes that progress on vaccination rollout should have a nascent effect on the economy, and allow for the economy to open up.
Vaccine Rollout to improve real GDP growth
With the country receiving 200,000 vaccines from India’s Covax vaccine in March, and further supplies likely to arrive in the coming months should gradually instigate an ease of restrictions. Also, the tourism industry which contributes 20% of GDP will improve from Q3 2021.
The tourism industry supported by tourism arrivals from Germany, France, and the UK, which supply 40% of all tourism arrivals in the country. Thus, as vaccination programmes in these countries progress, this will positively affect the country’s tourism industry.
Fitch Solutions expects the sector’s outlook to fair better during Q4 of 2021. On the back of this, the research firm forecasts net exports will add 1.0 percentage points to growth 2021, from a 7.3pp subtraction the previous year.
This notwithstanding, the expected recovery will be relatively weak due to the deep contraction in the previous year. More so, the impact of the pandemic on the labour market and on household incomes is likely to remain entrenched for a long time, Fitch Solutions indicates.
Available data indicates that unemployment trended at 10.4% in in Q4 of 2020, up from 6.4% in 2020. Fitch Solutions forecasts that unemployment will fall to 9.0% in 2021, while it signifies an improvement; it is well-above pre-pandemic levels. As a result, we forecast private consumption adding only 5.5pp to growth in 2021, from a 6.2pp decline the previous year.
Extending the outlook into 2022, Fitch solutions forecast real GDP growth of 5.6%, as the country’s economic recovery strengthens. One of the main growth drivers is the tourism sector, with tourism arrivals set to rise by over 85.0% year-on-year in 2022. Fitch also forecasts that net exports will add 1.2pp to growth in 2022.
This improved outlook for tourism will accelerate employment and household incomes for workers in the tourism sector, which will then spur private consumption. As a result, Fitch expects private consumption to add 2.6pp to growth over the year.
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