Mauritius' business confidence improved in the first quarter of 2011, lifted by an interest rate cut in the previous quarter and a favourable exchange rate, a survey showed on Thursday.
The quarterly survey by the Mauritius Chamber of Commerce and Industry, showed confidence stood at 106.5 points, up from 101.9 points in a similar survey conducted in December.
"This improvement can be explained by a renewed dynamism observed since the last quarter of 2010 among local enterprises following the rate cut in September," Renganaden Padayachy, macroeconomist at the chamber, told a news conference.
He said the rate cut also made the rupee currency more competitive.
"Mauritian products were also more attractive due to a favourable cross rate between the Euro and the US dollar during the first quarter," he said.
Europe is the island nation's main export market, accounting for 67 percent of exports. It is also a major source of tourists. Most of the Indian Ocean island's imports, like oil and machinery, are denominated in dollars.
"In addition, external factors like the increase in the cost of production in China and social unrest in the Middle East bring buyers back to Mauritius," Padayachy said.
Industry Minister Showkutally Soodhun said last month total exports will rise steadily over the next two years from 40 billion rupees in 2011 to 50 billion rupees in 2013 as the Indian Ocean island diversifies into new products and foreign markets.
However, Padayachy warned about the impact of the decision of the central bank last month to raise interest rates by 50 basis points to 5.25 percent to curb inflation.
"More than 90 percent of enterprises interviewed during the survey expressed their apprehensions over the impact of the rise in interest rate on their business given that they depend a lot on short term loans for their operations," he said.