PORT LOUIS (Reuters) - Mauritius's economy will grow more slowly than expected in 2012, partly due to a hit on tourism from the economic turmoil in Europe, said the central bank which expects to trim its forecast before its rate-setting meeting next month.
The debt crisis in the euro zone, the main market for Mauritius' exporters, has dampened demand for exports such as textiles and slowed tourist arrivals to the Indian Ocean island, denting economic growth.
A slowdown in sugar production also dragged on the economy.
"The growth forecast could be trimmed by 0.5 percentage points but we are working on it right now. Based on the present trends it is clear that we won't achieve 3.8 percent this year," Bank of Mauritius Governor Rundheersing Bheenick told Reuters on the sidelines of a banking event at the bank's premises.
The Indian Ocean island's $10-billion-a-year economy relies on European markets to buy its sugar and textile exports and provide the visitors that keep its key tourism sector running.
To help cushion exporters, Mauritius extended them a 600 million euro foreign currency credit line meant to help cushion exporters from the euro zone crisis.
"According to the latest data dark clouds still hang over the global economy," Bheenick said.
"That's why we came with the foreign currency credit line to help our operators to be in a better position to sit out the crisis instead of taking the easy solution of depreciating the rupee which is not a sustainable solution."
The number of tourists visiting Mauritius rose 0.5 percent year-on-year during the first six months of 2012, helped by a rise in arrivals from Asia that offset a drop in travellers from its core market in Europe.
Arrivals for Europe were down 6 percent to 279,643 - still around two-thirds of arrivals and were partly offset by an increase of 16.7 percent in visitor numbers from Asia to 51,353.
In June, Bheenick said the country was working to raise the foreign exchange to 6 months' of import cover from 4.5 months of import cover.
He did not give the latest figure of the size of reserves, but said that they had raised it, such that the rupee was now 5 percent weaker.
"There was some misalignment of the rupee as pointed out by studies of the IMF which needed to be corrected so we started the process of reserves reconstitution. I'm happy to note that since we announced it the rupee has adjusted by 5 percent," Bheenick said.
