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Points to ponder on economy

15 octobre 2014, 18:42

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lexpress.mu | Toute l'actualité de l'île Maurice en temps réel.

In view of the coming general elections, the author elaborates on five economickey factors of the country to enlighten the electorate. For him, the country needs a strong government which aims to meet the world economic challenges.

 

After more than six months of shilly-shallying between the MMM/PTR negotiation for an electoral-alliance, at least now the population is out of the political imbroglio with the conclusion of the said alliance, we know in which direction the country is going. The morose situation prevailing in the country nowadays is certainly not sound for a feel good factor which is a sine qua none element for the economy in order to enable it to take off safely.

 

The sooner the Parliament is dissolved and the general elections are organized the better will it be for political stability which is essential for economic stability. Nearly a decade have elapsed since the labour party as main partner of every alliance is in power, now it’s time for the nation to take note of the improvement or decline in their standard of living, such exercise is of utmost importance for every citizen of Mauritius.

 

The country needs a strong government aiming to meet the world economic challenges. As the electors will call upon to cast their votes in the coming months for the general elections, it is our responsibility and duty to assess the performance of the present government in order to have a clear view of the soundness of the economy.

 

1) Economic growth

It’s an undeniable fact that for more than a decade now the economic backdrop prevailing in Europe and America are impacting harshly on all related countries transacting majorly with them, even emerging economies like China, India, Brazil and Thailand are not spared from the negative incidence on their economies. As per the latest report of World Economic Outlook published by the International Monetary Fund, the economic recovery period of Europe and America are still in a waiting mode for positive growth, even China and India forecast reducing growth of 6 % and 4 % respectively.

 

As regards to Mauritius, economic reforms started since 2003 by the then Government MMM/MSM which embarked on a structural reform in the sugar sector by applying the Voluntary Retirement Scheme in order to face the acute reduction in the price of sugar on the international market. But despite the major structural reforms, the sugar sector is still struggling to survive. (See Table below)

 

 

Likewise the Export Processing Zone (EPZ) sector is facing hard times. The growth in the EPZ sector has been slowing down from 2006 which was 8% GDP to -3% GDP in 2013 but the Central Statistic office forecast a positive of 1% GDP for the year 2014. This sector needs to be restructured, making use of latest technologies in order to be productive and cost effective otherwise without a new economic agenda in line to render this sector resilient to face tough competition coming from Bangladesh, India, Philippine and other emerging countries, our EPZ sector will be compelled to key their doors.

 

The tourism sector which represents the third economic pillar of Mauritius has recorded insignificant growth to GDP for the last nine years. Growth  recorded on a three year basis showed that from 2006 to 2008 an average of 7.7% growth was registered yearly, from 2009 to 2011 there was a slowing down tendency with an average of 3.5% yearly and from 2012 to 2013 it was an average of 2% that was noted yearly. In terms of tourists’ arrival, a slight increase in the incomings was noted, as per statistics from 2006 to 2013.

 

The financial sector of Mauritius is the only one where constant sustainable growth of 10% to 14% are recorded for nearly one decade, hence it contributed in keeping the country to maintain a positive growth in the world financial and economic crisis. Despite a slow down of growth in the last Central Statistics Office (CSO) report, this sector rated fairly well and the resiliency depends on the credit worthiness of Mauritius and the enforcement of our legal framework to track down the laundering of black money and other illicit transactions routed through our offshore sector.

 

The seafood sector is taking time to emerge as a solid pillar of the economy which can support the traditional ones. Positive growth is recorded but it cannot be accounted as sustainable for the the present government did not come with a visionary road map in order to define the policy of this sector for the future and its contribution in the economic growth which will help the country to make a leap from middle to high income group country.

 

2) Budget deficit

The budgetary deficit is the second economic factor on which we based ourselves to assess the performance of the government in terms of competency and the capacity to shrink wastage of public funds. Though the government is in office for nearly a decade, it has not achieved a significant mark to put under control the budget deficit. Several mechanisms were introduced to cut public expenditures and to show good governance; but unfortunately it is done only for the form, in concrete no transparent actions have taken place in this direction.

 

3) Public debts

Every quarterly report of the CSO is showing an increase in public debts. When the present government came in power in year 2005, public debts was 55 billion rupees. We can recall at that time the government was criticising the previous government to increase public debts by 100% in five years time. But today the same government being in power for nearly a decade, public debts has reached 250 billion rupees. As a result of the declining of the purchasing power, the middle class families are heavily indebted and cannot afford to pay their debts in time. The mismatching of the salary scale and that of the increase in prices of commodities are obvious factors that are contributing to make these people leading an uncomfortable life.

 

4) Unemployment

Since 2005, the unemployment ratio of 8% keeps maintaining the same rate for the nine years elapsed. Despite a slight decrease of 0.2% noted in the last CSO report, still the rate of unemployment is alarming for the country. The CSO report shows that 42% of the unemployed people are under age group of 25 years old, specially graduates and HSC holders.

 

5) Inflation

Inflation is an important component in the assessment of economic performance, on the basis of macro economic indicators, inflation has been thoroughly monitored and the credit should go to the Bank of Mauritius for its assiduous concern in keeping inflation under control. For the last decade inflation has been ranged between 3% to 5% but we should not confuse between the increase in prices of goods and inflation.

 

 

The tourism sector has recorded insignifi cant growth to the Gross Domestic Product for the last nine years. While in terms of tourists’ arrival, a slight increase has been noted.