By Richard Lough PORT LOUIS (Reuters) - Mauritius' central bank said on Wednesday it saw no need to ease interest rates in the coming months with inflation set to fall to 4-5 percent and a robust economic recovery expected in the second half of 2009. Central Bank Governor Rundheersing Bheenick told Reuters in an interview that it was imperative for the bank to avoid negative real interest rates as they could lead to lower saving rates and encourage higher consumption. The bank's Monetary Policy Committee (MPC) held its benchmark repo rate at 5.75 percent last month, confounding analyst expectations of a significant cut to bolster growth and steer rates towards a level that support economic recovery. "By having a marginally positive yield we believe we have made the right moves and unless something drastic happens then maybe we will stay at that level for sometime," he said. He said saving rates on the Indian Ocean island had dropped from some 24 percent to 14 percent over the last five years and that was a real concern. Traditionally one of Africa's most stable and prosperous nations, the global economic slowdown has rocked Mauritius' key tourism and textile sectors. Growth is expected to slow to 2.5 percent this year from average growth above 5 percent over the last three years. Bheenick said the $9 billion-a-year economy contracted by an estimated 0.8 percent in the second quarter of the year after marginal growth of 0.1 percent in the first quarter, but the second half would be different. "Third quarter we expect a robust recovery. Fourth quarter (will) be even better," he told Reuters. MONETARY POLICY SPOT ON An improved economic outlook has eased fears over Mauritius' balance of payments. Bheenick said initial forecasts for 2009 had predicted a current account deficit above 12 percent. "Our revised projections show that the current account deficit as a proportion of GDP (gross domestic product) for 2009 is now at 7.2 percent, compared to 10.4 percent in 2008." Imports fell a sharper-than-expected 17.9 percent to 23.7 billion rupees in the first quarter versus the year ago period. Exports registered a marginal 0.3 percent decline. On inflation, Bheenick said the bank remained on target to achieve an average annual rate -- which peaked at 9.9 percent in November and slowed to 6.9 percent in June -- of between 4-5 percent by December this year. Year-on-year inflation, which he said bottomed out at 2.8 percent in May, is expected to trend upwards and converge with the annual average rate by the end 2009. The MPC warned last month that stimulus packages at home and abroad could lead to higher inflation when the economy recovers. In light of an expected economic recovery, Bheenick said the bank's monetary policy was spot on. "Our credit growth is not too fast and at the same time credit has not dried up to any particular sector. So at any time credit is still there," he said. "Our banks are still profitable. They are still borrowing and lending to the market. So I think we have reached a stage when the market can probably view the economy with more confidence." But with uncertainty over what shape an eventual recovery would take, Bheenick said it was too early to relax. "My gut feeling is that I am still scared by what is going on in the banking sectors of the countries where this (economic crisis) started." | 
