Mauritius - Economic Transition (TA) Project

Page 1 PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No.: AB4105 Project Name Mauritius - Economic Transition (TA) Project Region AFRICA Sector General industry and trade sector (100%) Project ID P105669 Borrower(s) GOVERNMENT OF MAURITIUS Implementing Agency Ministry of Finance and Economic Empowerment Environment Category [ ] A [ ] B [X] C [ ] FI [ ] TBD (to be determined) Date PID Prepared August 21, 2008 Date of Appraisal Authorization November 24, 2008 Date of Board Approval January 27, 2009 1. Country and Sector Background. Over the last decade the Mauritian economy expanded at an average annual rate of slightly over 5 percent with the Central Statistics Office (CSO) predicting that growth for the year 2008 is likely to be in the region of 5.5 percent, higher about the same as the 5.4 percent achieved in 2007. Growth is being driven by higher exports of services principally in the form of tourist earnings, increased private investment in non-residential buildings linked to the construction of Integrated Resort Scheme (IRS) 1 villas, hotels and shopping centers and a rise in consumption expenditure. On the other hand, the tourism sector which in 2007 accounted for 9.2 percent of the island's GDP and about 5 percent of jobs has been hit by the strengthening Mauritius rupee and the weakness of the US dollar against the Euro coupled with higher fuel prices across the world which have affected air ticket prices and the purchasing power of tourists. Mauritius' tourism sector will see slower growth of about 6 percent this year, down from 15.1 percent in 2007. Maintaining economic growth is proving to be a formidable challenge in the face of new emerging constraints. Among the obstacles to further growth is the erosion of Mauritius