UPDATE 1-Mauritius holds key repo rate, expects improved 2013 economy

Jean Paul Arouff
Reuters Middle East

(Adds details, analysts)

PORT LOUIS, Nov 26 (Reuters) - The Mauritius central bank held its key repo

rate unchanged at 4.90 percent on Monday, and said it expected its

economy to perform better in 2013 as economic conditions in its main trading

partner countries stabilised.

The Monetary Policy Committee said while there was some tentative evidence

of a "bottoming" in the global economy, there were still risks from the debt

crisis in the euro zone and high food prices.

"The domestic economy has withstood the external headwinds relatively well,

notwithstanding the slowdown in growth dynamics and price pressures in major

export sectors," the committee said in a statement.

"Projected growth for 2012 is maintained at 3.3 per cent and a preliminary

Bank of Mauritius staff estimate for 2013 shows a pick-up to a range of 3.6 -

3.9 percent as economic conditions stabilise in main trading-partner countries,

it said.

The committee said the central bank had forecast year-on-year inflation at

5.7 percent by December 2013 on a no-policy change basis and expressed "strong

concerns over a possible resurgence of inflation".

It added that the rate decision had been taken after a third round of

voting, after some members voted for a "marginal increase their worries over the

worsening inflation outlook while anchoring inflation expectations".

Some analysts expressed reservation at the central bank's cautious stance.

We believe that the MPC should have given priority to growth instead of

inflation given the slowdown on our main markets and its impact on our export

and tourism sectors," Raj Makoond, director of the Joint Economic Council, an

umbrella group of private sector organisations told Reuters.

"However, in the present economic context we feel that the decision of a

majority of members to maintain the repo rate rather than increasing it is the

least harmful," he said.

Eight out of nine analysts expect the central bank's Monetary Policy

Committee (MPC) to hold its benchmark lending rate at 4.9 percent.

The Finance Ministry has a growth forecast of 4 percent for the $10

billion-a-year economy from a projected growth rate of 3.4 percent this year.

(Reporting by Jean Paul Arouff; Writing by George Obulutsa; Editing by Yara


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