Sun shines on Mauritius as risk experts upgrade sovereign

By:
Jeremy Weltman
Published on:

The Indian Ocean island seems to have turned the corner and is pushing higher in Euromoney’s country risk survey rankings.

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Mauritius has failed to impress the risk experts in recent years, with the tourism industry – one of its main sources of foreign currency – affected by Europe’s economic decline.

However, all that seems to be changing.

The sovereign is still worse off compared with 2010 and the recovery will be gradual as question marks linger over its strength and sustainability.

And yet Mauritius has gained 2.2 points in Euromoney’s country risk survey this year, giving a total risk score of 49.2 out of 100 and pushing it three places higher in the global rankings.

Now lying 67th out of 186 sovereigns worldwide, sandwiched between Indonesia (66th) and Hungary (68th), Mauritius can be found towards the top of the fourth of five tiered categories, less than half a percentage point behind tier-three Romania.

With its capital access improved, the borrower is poised to make the leap into tier-three – the medium-risk category – if Europe’s recovery remains on track, especially now a resolution has been found for the Greek crisis.

Worthy of tier three?

The country’s political risks are already stronger than Romania’s.

With the general election in December 2014 delivering a majority to the Alliance of the People coalition led by the experienced Anerood Jugnauth – a former president and prime minister, several times – the score for government stability has increased this year.

An anti-corruption and money-laundering campaign has similarly improved the country’s reputation for graft. The Prevention of Corruption Act is to be amended, a Financial Crime Commission set up and a new Fraud Act introduced. There are plans for politicians to declare their assets and a code of political conduct introduced.

Only its economic risks need to catch-up:

However, there are encouraging signs there, too.

Business sentiment has improved lately, according to the latest quarterly confidence index from the Mauritius Chamber of Commerce and Industry (MCCI).

The index climbed to 89.8 in the second quarter from 87.9 in the first.

MCCI economist Renganaden Padayachy adopted a naturally cautious stance at the press briefing, which seems sensible in the light of new risks to the global economy from China.

However, the tourism industry should see a kick-back from Europe’s economy rebounding, especially with the questionable safety in other holiday destinations in the Middle East and Africa, including Egypt, Kenya, Tunisia and Turkey, to a lesser or greater extent.

Meanwhile, economic growth as a whole is forecast for a real-terms improvement, from the 3.2% level it has been stuck at for the past three years, to 3.8% this year.

Next year’s predicted pace of 4.6%, according to the central bank, would be its strongest since 2008.

These predictions are reflected in upgraded scores from Euromoney’s survey contributors for all five of the country’s economic risk indicators. Some, such as the government finances, are still fairly low-scoring, underlining the country’s medium-term fiscal risks.

However, Mauritius seems to be now offering a safer portfolio option.

This article was originally published by ECR. To find out more, register for a free trial at  Euromoney Country Risk.