In the context of the Monetary Policy Committee (MPC) meeting where the Key Rate was kept unchanged at 4.50 per cent per annum, Governor at the Bank of Mauritius (BoM), Dr Rama Sithanen, in a media briefing, called it a finely balanced decision on account of global uncertainties. He commented: “The MPC will continue to closely monitor economic developments and stands ready to meet in between its regular meetings and spearhead appropriate actions to achieve its dual mandate of maintaining price stability and promoting orderly and balanced economic development.”
The Governor remarked that domestically, real GDP growth was lower at 4.2 per cent in 2025Q1 in relation to 5.2 per cent in 2024Q4, dragged down by contraction across sectors such as ‘Accommodation and food service activities’ and “construction’. While on the demand side, consumption expenditure remained the main driver of growth in 2025Q1, investment spending remained lacklustre. He further remarked that some important economic sectors may register lower than expected growth rates.
The bank initially projected GDP growth for 2025 poised to be in the range of 3 percent to 3.5 percent during the MPC meeting in meeting and set against a new context laden with uncertainty, points to GDP growth at 3 percent.
Headline inflation has edged up for the fourth consecutive month to hit 3.1 percent in July 2025, while year-on-year inflation remained high at 5.2 percent, reflecting the impact of budgetary measures, encompassing higher taxes imposed on demerit goods and additional excise duties on cars. Dr Sithanen mentions that as the one-off effects of budget related prices hikes wears off, inflation is expected to be firmly anchored with the bank’s target range between 2 and 5 percent throughout the year while year-on-year inflation is poised to subside with headline inflation expected to be at 4 percent for 2025, considered 0.5 percentage point higher as compared to the previous forecast of 3.5 percent.
The MIFC, the Governor remarked, continues to drive financial flows with the fact that global cross-border investment activities remain resilient in the face of numerous challenges, attributed to a growing global uncertainty in the context of the US’s new tariff policy. Risks to financial stability were kept moderately during the first half of 2025 and is expected to remain so for the rest of the year with a resilient banking sector to a slew of potential adverse events, propelled by its strong capital and liquidity buffers complemented by the robust prudential regulatory regime with a Capital Adequacy Ratio at 21.8 per cent in March 2025. The sound liquidity buffer is evidenced by the Liquidity Coverage Ratio of 281.6 in June 2025, hovering well above the minimum threshold of 100 percent.
On the other hand, the annual growth of bank credit advanced to the private sector stood at 11 percent in June 2025, attributed to growing household and corporate credit portfolio. Credit to the corporate sector increased by 10.1 percent, while household credit increased by 12.3 percent in June 2025.
In the wake of the above-listed trends and developments, the MPC noted that despite announced breakthroughs in trade talks, the global trade ecosystem is still marred with uncertainty, where the fallout of a new tariff on growth and inflation across markets and regions is still highly predictable.
The Governor commented: “The bank has to balance its responsibility to counter inflation against concerns that rising tariffs and global trade war may slow down economic growth. On the domestic front, growth prospects are highly delicate and surrounded by downside risks, while upside risks to the inflation outlook dominate. Moreover, global uncertainties set against the backdrop of evolving trade policies, ongoing geopolitical tensions, and uneven recovery across major economies call to exercise cautious and data-dependent approach to monetary policy.”
