Mauritius central bank cuts repo rate and 2017 growth forecast

Jean Paul Arouff, Reuters |

06 September 2017


PORT LOUIS, Sept 6 (Reuters) - Mauritius’ central bank cut its repo rate on Wednesday for the first time in a more than a year to try to stimulate the economy, as it reduced its 2017 growth forecast.

The Monetary Policy Committee cut the repo rate to 3.50 percent from 4.00 percent. It has been held at 4.00 percent since July 2016, when it was from 4.40 percent in February the same year. The bank said in a statement that it had also lowered its economic growth forecast for this year to 3.6 to 3.8 percent, from its previous forecast of 3.8 to 4.0 percent.

It forecasts growth of 4.2 percent in 2018 and headline inflation of about 4.0 percent for calendar year 2017 and about 3.8 percent in 2018.

“The MPC took the view that there is a need to stimulate more investment into the productive sectors of the economy,” the statement said.

“The MPC weighed the risks to the growth and inflation outlook and decided to give a fillip to the growth momentum.”

Mauritius’ inflation fell to 5.3 percent year-on-year in July from 6.4 percent a month earlier.

“It’s a welcome move by the central bank as it will give a boost to the export sector. The rate cut will make the rupee more competitive. It will help further investment, given that the cost of debt will go down,” Afsar Ebrahim, deputy managing director of accounting firm BDO Mauritius told Reuters.

In August, the International Monetary Fund said Mauritius’ monetary policy was accommodative and recommended tackling inflationary pressures by tightening monetary policy, while modernising the monetary policy framework to strengthen policy response to shocks.