Bloomberg News

Mauritius Feels Euro-Area Crisis Winds as Trade Deficit Swells

May 29, 2012

Mauritius’s trade deficit widened during the first quarter as the financial crisis in Europe curbed demand for Mauritian goods.

The trade gap for the three months through March rose 12 percent to 18.7 billion rupees ($631 million) compared with a year earlier, Port Louis-based Statistics Mauritius said in a statement today on its website. Exports increased 2.6 percent to 18.2 billion rupees and imports rose 7.3 percent to 36.9 billion rupees. Orders from France, the U.K., Spain and Italy declined 7.2 percent to 7.7 billion rupees.

Mauritius, an Indian Ocean island nation that sells 60.7 percent of its exports to Europe, underscores the global impact of the euro-area crisis. With the rupee gaining against the euro, exports become less competitive, and the impact ripples through to domestic consumption. Statistics Mauritius forecast imports of 165 billion rupees this year, down from an initial outlook of 172 billion rupees.

The data “doesn’t look good,” Renganaden Padayachy, an economist at the country’s Chamber of Commerce and Industry, said in a telephone interview today. “We need to regain competitiveness for our exports.”

The rupee weakened 1.5 percent in the first quarter against the euro, which makes up about 41 percent of the country’s foreign-currency income, according to the Bank of Mauritius.

“Our rupee is still overvalued,” Padayachy said. “The cut in the benchmark interest rate hasn’t had the required impact on the rupee.” Mauritius’s central bank cut the benchmark interest rate by 0.5 percent to 4.9 percent on March 19.

South Africa is the island nation’s largest regional trading partner, with exports to Africa’s largest economy rising 33 percent to 1.43 billion rupees. Mauritius, with a population of about 1.3 million, is a net buyer of fuels and food, with India the largest supplier at 25 percent of the total, the data agency said.

Maritius does have “some resilience through diversification,” Padayachy said.

To contact the reporter on this story: Kamlesh Bhuckory in Port Louis at kbhuckory@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net


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