monetary policy committee recent economic developments m. heerah-pampusa head - economic analysis...

Monetary Policy CommitteeRecent Economic Developments

M. Heerah-Pampusa

Head - Economic Analysis Division

14 July 2014

© Bank of Mauritius 2

Main Points

• Confirmation of stronger global growth in 2014• Decoupling among advanced economies• Slow pace of growth in emerging markets possibly

bottoming out• Global inflation picture benign – recent increase in oil prices

could be a risk

• Domestic output to benefit from international developments

• Some downside risks • External demand• Domestic demand

© Bank of Mauritius

External Environment

3


Expansionary near-term outlook

Source: JP Morgan.


Mixed Performance in Eurozone

Source: OECD.


Moderate global inflation …..

June 2014 Reuters poll: mean inflation rates in the US, UK and euro area are expected to be around 2.1 per cent, 1.9 per cent and 0.9 per cent, respectively, by end-2014.


…… but some upside risks from higher oil Prices

Sources: FAO and Reuters.

FAO Food Price Index Oil Prices

EIA Forecast for Brent crude oil prices: $108 a barrel in 2014.

160

170

180

190

200

210

220

230

240

250

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2010

2012

2011

2013

2014

Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14

90

95

100

105

110

115

120

90

95

100

105

110

115

120

ICE NYMEX

US$ per barrel


Developments in the domestic economy since the last

MPC meeting


Slower growth in 2014Q1

0

1

2

3

4

5

6

72

01

0Q

1

201

0Q

2

201

0Q

3

201

0Q

4

201

1Q

1

201

1Q

2

201

1Q

3

201

1Q

4

201

2Q

1

201

2Q

2

201

2Q

3

201

2Q

4

201

3Q

1

201

3Q

2

201

3Q

3

201

3Q

4

201

4Q

1

201

4Q

2

Y-o-Y (sa) Q-o-Q (annualised, sa)

Per cent


Output gap assessed to be negative …

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.52

00

8Q

12

00

8Q

22

00

8Q

32

00

8Q

42

00

9Q

12

00

9Q

22

00

9Q

32

00

9Q

42

01

0Q

12

01

0Q

22

01

0Q

32

01

0Q

42

01

1Q

12

01

1Q

22

01

1Q

32

01

1Q

42

01

2Q

12

01

2Q

22

01

2Q

32

01

2Q

42

01

3Q

12

01

3Q

22

01

3Q

32

01

3Q

42

01

4Q

12

01

4Q

2

HP

Band-Pass

Kalman

Per cent


… while monetary conditions continue to be accommodative


Exports: moderate growth


External Trade Exports

Imports

Per cent

Per cent

2012Q1 2013Q1 2014Q1

Europe 0.1 8.9 -5.0

of which

UK 3.4 9.3 -16.4

France -9.4 -5.0 19.1

Italy 17.4 30.6 2.1

South Africa 32.4 3.3 -20.2

USA 4.1 1.7 21.1

Asia 21.4 36.2 75.0

2012Q1 2013Q1 2014Q1

India -3.2 14.3 -13.6

China 15.7 -2.6 4.7

France 5.3 -7.0 -3.0

South Africa -19.4 13.2 -6.8

Total imports 7.4 2.0 -5.6

2012Q1 2013Q1 2014Q1

Total Exports 6.0 13.1 5.0

excluding ships, stores & bunkers 16.7 42.7 7.7

Domestic Exports 6.2 8.7 -1.3

Re-exports -4.4 3.8 33.6


Investment: slow recovery from 2012/2013 lows

• Continued contraction in Building and Construction work in 2014Q1 (-3.2%), but machinery & equipment up by 11%.

• GDFCF to grow by 0.4% in 2014 , but to contract by 0.8% excluding aircraft and marine vessel. This is compared to contraction of 3.3% [6.7% excl. aircraft & marine vessel] in 2013.


Growth in GDFCF driven by jump in public investment

2014* - Forecast.


Declining savings and investment rates

2014* - Forecast.


MCCI Business Confidence Index (June 2014)

• Indicator fell to 79.6 points in 2014Q2.

• Underlying factors: subdued domestic demand, fierce competition in the local market, cost of capital, lack of skilled labour, unfavourable exchange rate.


Pluriconseil Barometer

February-14 April-14 June-14Optimism about economic outlook (one year ahead)

50% of respondents 60% of respondents 60% of respondents

Growth 3.3% to 3.6% (90% of respondents)

n.a 3.3% to 3.6% (67% of respondents)

Unemployment rate 8.3% or more(67% of respondents)

n.a 8.0% to 8.1% (70% of respondents)

Inflation rate Up to 4.0% in June 2014 (53% of respondents)

Up to 4.2% in June 2014 (67% of respondents)

4.2% (40% of respondents)

KRR n.a Unchanged (90% of respondents)

n.a


Consumption: slight pick-up expected in 2014

• Final consumption growth of 2.6% in 2014 compared to 2.3% in 2013• Private consumption growth projected at 2.8% in 2014, from 2.6% in 2013• Govt consumption growth to increase to 2.0%, from 0.7%


Labour market

2013Q1 2013Q4 2014Q1Unemployment rate (%) 8.6 7.5 8.0Unemployment rate SA (%) 8.0 8.3 7.4


Decline in productivity


Sectoral Contribution to Growth


Y-o-y growth rates in some key sectors

-20

-16

-12

-8

-4

0

4

8

201

1 Q

1

201

1 Q

2

201

1 Q

3

201

1 Q

4

201

2 Q

1

201

2 Q

2

201

2 Q

3

201

2 Q

4

201

3 Q

1

201

3 Q

2

201

3 Q

3

201

3 Q

4

201

4Q

1

Accommodation & Food Service

Manufacturing

Construction

Per cent

• For 2014, SM expects growth of 5.3% in ‘financial and insurance activities; 3.5% in ‘accommodation and food service activities’; and 1.7% in manufacturing;

• Construction may contract by 4.8%


Improvement in tourist arrivals

• Tourist arrivals increased by 5.3% y-o-y in May 2014.• Y-o-y growth of 3.3% during period Jan-May 2014• Forecast of 1,030,000 arrivals in 2014.


Fall in tourist earnings expected to be reversed

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Rs billion

2010

2011

2012

2013

2014

• Fall of 2.1 per cent y-o-y for the first five months of 2014 to Rs19.2 bn• Projected increase of 9.7% to Rs44.5 bn for 2014


Recap

• Slower growth in 2014Q1

• But, improving international environment should have positive impact on external demand going into 2014H2

• This should translate in a gradual improvement in domestic demand


Thank you

monetary policy committee recent economic developments m. heerah-pampusa head - economic analysis...

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