Budget Analysis

Charting towards a high-income, inclusive society

The Finance Minister, Honourable Pravind Kumar Jugnauth delivered his third Budget Speech, fourth of the present Government, with the overall objective of further transforming Mauritius into a high-income inclusive economy. He faces the challenging task of steering the economy in a context of growing uncertainties and challenges, both domestic and global, characterised as well by heightened expectations from all segments of the Mauritian society.

On the global front, divergence of views on trade issues at the G7 summit in Canada last week combined with mounting trade tensions between the US and China raises the risk of a revival of trade protectionism, which would not be in the interest of Mauritius. The decision of the Fed to raise its benchmark interest rate by 25 basis points this Wednesday coupled with clear signals for further hikes over the next year, intensifies the need for open economies like Mauritius to monitor capital outflows closely.

Domestic challenges include the increasingly apparent economic growth stagnation in the range of 3 percent – 4 percent since 2011, a sustained surge in headline inflation from 1 percent in January 2017 to 5 percent in March 2018 driven by core inflationary pressures and a stabilisation of private investment to GDP at a low of 17 percent since 2015. The prevalence of high consumption with considerable import content, increasing frailty of traditional export pillars despite continued targeted assistance and preferential exchange rates, and changes to the Global Business environment warrant the attention of the authorities.