The Bank of Mauritius, which cut its rate by 40 basis points in July, said its staff was now projecting Gross Domestic Product growth of 3.5 percent for this year, down from 3.6 percent that was forecast in July, and between 3.8 and 4.0 percent for 2017.
"It is expected that the implementation of major infrastructure projects as announced in the Budget should give a boot to investment in 2017," the bank said.
In July the central bank revised down its 2016 growth forecast to 3.6 percent from 3.8 percent and forecast 3.8 percent growth for 2017.
In 2015 Mauritius' GDP grew 3.1 percent and in the second quarter of this year it grew by an annual rate of 3.7 percent, up from 3.6 percent in the first quarter.
Inflation in Mauritius rose to 1.5 percent in October from 0.9 percent in the two previous months on subdued global commodity prices and "persistent slack in the domestic economy," the bank said.
The central bank forecasts an average rate of around 1.0 percent this year, rising gradually to 2-3 percent in 2017.
In addition to the state of the economy, the bank's Monetary Policy Committee took note of its efforts to mop up excess liquidity in the banking system and discussed the new monetary policy framework that it plans to implement in early 2017, the first change in framework since the current system was implanted in December 2006.
The Bank of Mauritius issued the following statement:
"The Monetary Policy Committee (MPC) of the Bank of Mauritius unanimously decided to keep the Key Repo Rate (KRR) unchanged at 4.00 per cent per annum at its meeting today.
Global economic conditions remain subdued. The IMF has maintained its world growth projection for 2016 at 3.1 per cent and 3.4 per cent for 2017 in its World Economic Outlook released in October 2016. The MPC noted that risks to the global growth outlook remain tilted on the downside due to stagnating global trade, Brexit, intensified financial markets volatility and geopolitical risks.
The MPC discussed prevailing domestic economic and financial conditions and noted that, currently, the economy is operating below its potential. Bank staff is now projecting a real GDP growth rate of 3.5 per cent for 2016. The MPC took note of the Bank staff growth forecast for 2017 ranging between 3.8 and 4.0 per cent. It is expected that the implementation of major infrastructure projects as announced in the Budget should give a boost to investment in 2017.
Domestic inflation remains so far muted, with headline inflation contained at below 1 per cent in line with subdued global commodity prices and persistent slack in the domestic economy. Measures of core inflation have also been low and moderate. Headline inflation was flat at 0.8 per cent in September and October 2016. It is projected at around 1 per cent in 2016 and to rise gradually to a range of 2 to 3 per cent in 2017.
The MPC also took note of the steps taken by the Bank of Mauritius to mop up excess liquidity in the banking system and discussed a new monetary policy framework that the Bank is proposing to implement in early 2017.
The MPC will issue the Minutes of its meeting on Thursday 24 November 2016."
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