The Economy in 2015
The Mauritian economy grew by 5.5% and 5.7% in 2007 and 2008. Since then, it has been increasing by less than 4% annually except for 2010 when the growth rate was temporarily above, at 4.2%. It must be said that the world economy hasn’t been doing that well since the economic crisis of 2007-08. Since Mauritius is an outward-oriented economy, the challenge for us has been to grow domestic and export sectors of production enough that would have allowed us to get over the slowing global pace. The below 4% growth rates since 2011 at least show that we have not been able to meet this challenge.
Our GDP grew by 3.2% in 2013 and 3.5% in 2014. Its growth is estimated marginally up at 3.6% for 2015. Conscious of this fairly enduring constraint to economic growth, the new government set itself ambitious goals for the lift-off of the economy. This year’s Budget placed emphasis on the SME sector, the port as a new hub of activities and the development of several ‘smart cities’ as the drivers of the higher growth targets.
Soon after, the Prime Minister himself came to announce a series of economic initiatives being taken by the government in what was called the ‘Economic Mission Statement – Vision 2030’. Measures announced included the development of the Ocean Economy, making the port the hub of enhanced new economic activities such as bunkering, establishing a regional aviation hub, strengthening the scope of the country’s international finance activities and better incorporating the ICT sector into the development process. A public-private sector high level joint committee was also established to ensure that there is an effective centralization of decision-making and that road blocks to economic development are expeditiously dealt away with.
Without saying it in so many words, the PM’s ‘Economic Mission Statement – Vision 2030’ was intended to overcome an overwhelming negative sentiment which had been introduced in local business circles by the way the BAI affair had been handled and the manner in which discussions had been held and seemingly finalized concerning the Double Tax Avoidance Agreement with India. It is uncertain as of now whether the apprehensions have effectively been exorcised.
The domestic investment rate (ratio of investment to GDP) was already on the low side and erratic since a certain number of years. It remained low at 19.1% of GDP in 2014 and is expected to stand at around 18.5% in 2015. Changes in the level and rate of investment indicate whether the economy is confidently moving forward, hesitating or contracting. The data show that, at least as far as 2014 and 2015 are concerned, the enthusiasm hasn’t been strong. Private sector investment contracted in these two years by 8.4% and 3.9%, respectively. Thus, despite the public sector investment increasing by 1.8% and 9.5% in these two years, the overall investment rate of the economy actually declined.
In the face of such a picture of our economic performance, the government has lately clarified its position to state that the exceptionally high growth phase of the economy underlying its economic program cannot be achieved overnight. This is a correct assessment of how things play out in reality. Even if one has laid down the solid foundations for future economic growth, one depends on a favourable concourse of events both domestically and internationally to embark on a higher growth path.
Data for the period October 2014 to September 2015 show that the country’s industrial production (20% of our GDP) grew by 2.3%. There is indeed a slowly upward growth trend of industrial production since 2008 but 2015 has been slower along this trend line. Of the group classified as forming part of the industrial sector, it is observed that manufacturing increased by 1.9% overall during this period and that, within manufacturing, Export Oriented Enterprises saw their production contract by 1.1%. On the other hand, food production has increased the highest by 4%. This mixed picture shows that we have to make some effort before the industrial sector can become, as it was before, a significant contributor to overall economic growth.
Figures show that a stronger foundation is necessary to launch the economy on to a higher growth path, as contemplated by the government. So, we will need to first overcome past handicaps such as the successive contraction of the country’s total investment by 6% and 0.5% in 2014 and 2015, respectively. The government appears to be constrained towards such an objective as far as availability of public resources is concerned: the public debt stands currently at around 63% of GDP, way above the target of 50%, which means that it will have a lot of skillful maneuvering to do to raise resources for projects from outside of the public sector portfolio.
While 2015 has not yielded a rich harvest towards building up a strong base for economic progress so far, notably with upsets in the financial sector and some loss of confidence, entrepreneurs will nevertheless have to take more risks to push up the economy’s potential. They will need to look out for more than tax incentives if they truly want to enlarge the economic base of the country. There is an urgent need to look out for, amongst others, markets for our products, reliable and resourceful external partners in business and a predictable cadre for undertaking economic activities.
Mauritius may not break out in the given present global circumstances. But then, what’s the alternative? We need to cross the below 4% annual growth rate we’ve seen in past years if we want to be in the company of the next generation of “breakout nations”. Mauritius will need to make newer openings in outside markets accompanied by higher levels of efficiencies in all it undertakes. 2015 has shown that this is the new challenge for the country.
Sectors of activity like Export Oriented Enterprises, once the springhead of our economic sustenance, are facing more and more difficulties on external markets. They need to be re-energized for survival. Realistic economic policies wedded with enhanced local resources should help us overcome constraints for the sustained growth of both our goods and services sectors of production. Economic re-engineering is fast becoming an imperative for us and everybody should lend a helping hand to get over the oncoming constraints to future growth.
* Published in print edition on 25 December 2015