Mauritius should hold lending rate, eyes stronger 2010 GDP-IMF

By Jean Paul Arouff PORT LOUIS, Nov 4 (Reuters) - Mauritius should hold its benchmark lending rate steady at 5.75 percent but keep an eye on consumer prices as the global economy rebounds, the International Monetary Fund said. The Washington-based body noted early indications of an improved outlook in the Indian Ocean island's key tourism and export sectors. It said economic growth in 2010 would be considerably stronger than this year. Official data forecasts 2009 growth at 2.7 percent. "Pending further indications on economic prospects, the interest rate should be maintained at its current level, remaining vigilant should inflationary pressures arise as the world economy recovers," Atish Ghosh, IMF mission chief for Mauritius said in a statement released late on Tuesday. The IMF said Mauritius' prompt, coordinated response to the global downturn, which included a $340 million stimulus and monetary loosening, had cushioned the crisis' impact and better positioned the nation of 1.3 million people to recover from an upturn in the world economy. The IMF did not offer a precise growth forecast for 2010 as it concluded its annual Article IV consultations. Best known for its palm-fringed shores and azure waters, Mauritius suffered as the worldwide economic slump hurt its tourism revenues, squeezed demand for textiles and slowed business in its offshore banking sector. Finance Minister Ramakrishna Sithanen, who will read his 2010 budget in two weeks time, expects the $9 billion economy to grow by 4.5-5.0 percent next year. "The challenge now is to determine when to resume fiscal consolidation without jeopardising the recovery by prematurely withdrawing stimulus," said Ghosh. He added that as the effects of the global crisis pass, a tighter fiscal policy and an effective debt management strategy should help place public debt back on a downward path. Last month, Sithanen said he expected public debt this year to remain more or less at the same level of 57 percent of gross domestic product registered in 2008. Some analysts regard the government's growth forecast for next year as optimistic, arguing there remains too much uncertainty still over the shape of recovery in Mauritius' leading export markets. (Writing by Richard Lough; editing by Neil Fullick) (For more Reuters Africa coverage and to have your say on the top issues, visit: http://af.reuters.com/) Keywords: MAURITIUS ECONOMY/ (Email: [e-mail]; tel: [phone]) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved.

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