8/12/2019 COuntry Risk Mauritania

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Mauritania

RISK ASSESSMENT

Growth driven by investment in the extractive industries

In 2013, growth will be driven by investments in the extractive industries (oil, gas, minerals). Foreign investments will focus, in particular, on oil andnon-ferrous metals. Domestically, the National Industrial and Mining Company (a mainly state-owned company) is expected to expand its activities.Meanwhile, agricultural revenues, which fell in 2012 due to severe drought, are expected to rebound this year, thanks to improved weatherconditions. Aid from international donors will also impact positively on growth. It will be used in particular to recapitalise the National ElectricityCompany after this has been restructured. Reorganising the electricity sector will also involve the application of new, higher tariffs. These reforms willenable development of a crucial economic sector. However, the economy remains vulnerable to further deterioration in demand from the eurozonecountries and a bigger than predicted fall in raw materials prices, on the back of a slight expected fall in the oil price.

Growing trade deficit

Mauritanias exports, dominated by the mining sector (75% of the total), are expected to grow in 2013. However, the volume of imports will increasemore rapidly because of investments in gas and oil exploration, which necessitate purchase of intermediate products, leading to a widening of the

Population

3.628million

GDP

4.096US$billion

@ratingcountry

Business climateassessment

MAJOR MACRO ECONOMIC INDICATORS2010 2011 2012(e) 2013(f)

GDP growth (%) 4.9 5.5 5.8 6.9

Inflation (yearly average) (%) 6.3 6.2 6.3 6.1

Budget balance (% GDP) -4.3 -1.4 -1.3 -2.3

Current account balance (% GDP) -12.9 -9.4 -19.3 -13.5

Public debt (% GDP) 92.8 83.5 70.0 67.4

(e) Estimate (f) Forecast

Support from European and Arab donor

Mineral and fishing wealth

Encouraging oil prospects

STRENGTHS WEAKNESSES

Persistent political instability: Islamic terrorism, coups

Permeable borders

Economy too dependent on raw materials: iron, copper, gold,quartz, phosphates, cattle-rearing, fishing

Very sensitive to mineral and foodstuff price fluctuations

8/12/2019 COuntry Risk Mauritania

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trade deficit. The balance of services is expected to show a considerable deficit. Imports of services, also borne up by the growth in extractiveactivities, will remain high. Moreover, tourism revenues will remain weak due to the difficult security environment. However, the balance of transferssurplus will be sustained by substantial aid flows. The total current account deficit is expected to fall in 2013 and will, moreover, be largely covered byforeign investments in the extractive industries.The fiscal deficit is expected to widen in 2013, with spending slightly exceeding revenues. However, it will remain contained due to the fiscalconsolidation policy adopted under the aegis of the IMF. Income from mining and the efforts made to recover taxes will enable the financing of acomplete emergency aid programme in the event of drought. Public debt, for its part, still needs to come down. After declining by over 70 percentagepoints following the 2006 multilateral debt relief initiative, then by 8 more points following debt cancellation by Algeria and Libya in 2010, the ratio ofdebt contracted and guaranteed by the state will total about 67% of GDP in 2013.

A difficult security situation

The Mauritanian president, Mohamed Ould Abdel Aziz, is expected to remain in power until the next elections planned in 2014, despite internaltensions. The opposition party, Coordination of Democratic Opposition, declared a power vacuum, resulting, it said, from the institutions lack oflegitimacy but, above all, from the absence for several weeks of the Head of State, wounded in a shooting incident in October 2012. This may havebeen organised by members of the army, which no longer supports the President. However, terrorism remains the chief risk, in particular attacks byAl-Qaida in the Islamic Maghreb, which has further increased its influence in the region since taking control in the north of Mali. This situation willcontinue to worsen the business climate.