Published: May 10, 2021
Despite a difficult year and a recent ratings downgrade, Mauritius is looking to develop itself as an International Finance Centre as it bounces back from Covid-19.
In common with many other countries, the Mauritian economy has been hard hit by the Covid-19 pandemic. While cases and deaths have remained relatively low at 1,208 cases and 17 deaths as of April, the strict measures designed to suppress the virus have proven economically challenging.
On 4 March, Moody’s downgraded Mauritius’ ratings from Baa1 to Baa2, with a negative outlook. This downgrading, said Moody’s, ‘reflected the erosion of Mauritius’ fiscal and economic strength’ in the wake of the Covid-19 pandemic, as well as the limited prospects for swift recovery. While Mauritius’ credit profile is supported by a strong institutional framework, the scarring is more severe than Moody’s envisioned a year ago. In fact, the economy has registered its worst outcome since 1980.
As Thierry Vallet, interim CEO at AfrAsia Bank tells EMEA Finance, the country cannot expect a V-shaped rebound. With border restrictions placing a dampener on the tourism sector, recovery is likely to happen only slowly.
“Mauritius drained out more than 14% of its wealth in 2020 and the 2021 rebound will be slightly weaker than foreseen due to more than seven weeks of soft lockdown,” Vallet says. “The country can surge back to pre-pandemic levels only in 2023, assuming market conditions continue to normalise and government decisions continue to be geared towards business facilitation, reviving consumption, and household spending.”
Unsurprisingly, Mauritian banks have had a difficult year. AfrAsia Bank has seen a fall in profits, largely due to a drastic fall in interest rates coupled with a 30% contraction in non-interest income. That said, its balance sheet remains sound, with robust capital and liquidity ratios. The bank has also broadened its wealth management desk and accelerated its digital transformation strategies.
“Despite the unprecedented challenges, we extended credit and served as a port in the storm for our clients and customers,” says Vallet.