The central bank of the Indian Ocean island of Mauritius left its benchmark interest rate steady but lowered its forecast of economic growth this year to a contraction of 13 percent versus its July forecast of a 12.5 percent contraction as its economy continues to suffer from the impact of the COVID-19 pandemic.

The Bank of Mauritius (BOM) kept its key repo rate (KRR) at 1.85 percent after cutting it by a total of 150 basis points in March and April.

Although the global economy is showing some signs of improvement, the pace of the recovery depends on containment of the pandemic and the domestic economy is still facing the disruptive effects of COVID-19 as cautious spending and economic uncertainty continue to impact both household spending and private investment.

"The contraction in major trading partners' output would result in weaker demand for our exports," BOM said, noting its staff had revised down its projection for gross domestic product growth for 2020 to minus 13.0 percent from an earlier minus 12.5 percent.

For 2021 GDP is seen growing about 7.5 percent, slightly up from an earlier forecast of 7 percent growth.

In the first quarter of this year Mauritius' economy contracted by 2.0 percent year-on-year, the first contraction since 2005, with tourism hard hit.

Inflation was steady at 1.5 percent in August and July and BOM forecast inflation of around 2.5 percent in both 2020 and 2021.

After falling in March, the Mauritian rupee has been relatively stable, trading at 39.9 to the U.S. dollar today, down 8.8 percent this year.