After months of pessimism, the first economic forecast by the Mauritius Commercial Bank (MCB) for 2005 looks promising. Though the Gross Domestic Product (GDP) was reviewed upward by only 0.1% ? from 5.1% to 5.2% ? it is a sign that there is a certain recovery.

The report states that tourism is the main factor which allows this cautious optimism. After a gloomy year in 2004 with a 2.6% growth rate, the sector should experience a higher one with a forecast of 8.2% due to several factors. First, the traditional tourist markets have benefited from an economic recovery and this should reflect on the local industry. Moreover, the Rs 100 million marketing campaign of the Mauritius Tourism Promotion Authority (MTPA) in our main markets will certainly help. It aims at relocating Mauritius on the ?tourist map? of these countries (France and United Kingdom).

However, the report warns: if the country doesn?t start a ?reform? in the way it is handling the tourist sector, all the positive factors will have no effect.

But tourism is not the only reason for the better forecast. It may look surprising in the current context but a (slight) recovery in the Export processing zone is also behind this upward trend. While the sector has experienced a 16.2% contraction in the past years, the MCB expects a positive growth rate this year. The dismantling of the multi-fibre agreement (MFA) has just come into force and it may take some time before the sector feels its negative consequences. Many EPZ companies have experienced better profitability this year though this is mainly due to redundancies.

However, the MCB warns that this situation will not last long if nothing is done to improve competitiveness. China and other giants are there since the dismantling of the MFA and Mauritius must find ways of managing the inevitable crisis.

Inflation is expected to increase and reach 5.2% in June. However, the situation should get back to normal in the second semester of the year.