MCB Focus : a growth of 3.9% predicted

In its 71st issue of Economic update, MCB is predicting a growth of 3.9%.  “As per current indications, the country’s economic expansion is likely to improve slightly this year when compared to 2017.

Thus, while staying close to the prognosis formulated by Statistics Mauritius, the IMF and World Bank, real GDP growth is, as per our baseline scenario, predicted to increase to 3.9% when measured at both market and basic prices.”

It can also be read that due to recent floods hitting several cultivated areas, the non-sugar agriculture sector is now forecast to post a more inhibited performance than previously expected.

“It is worthwhile to note that, along with these segments and despite measures executed to boost activity levels, several strategically-important sectors of the Mauritian economy – notably the export- and domestic-oriented manufacturing industries – are foreseen to post restrained growth in value added this year, mainly owing to uncertain market access and local structural bottlenecks.” 

The MCB focus also states that noteworthy performances are more likely to be registered by the ICT and financial and business services industries, although some global business operators are likely to face up to challenges in adapting to the evolving operating environment.

Otherwise, the MCB predicts low investment in public investment. One main reasons for is due to delays in projects like the execution of specific projects forming part of the Road Decongestion Programme.

“Notably, public investment should benefit from the unfolding of the Metro Express mega-project, with on-site works between Port Louis and Rose Hill having started since January. Besides, works for the construction of the Decaen flyover along Motorway M1 to connect the traffic to the City Centre have been initiated.” However, for the private sector investment, a growth of 13.2% is expected.

Unemployment : a decline of 6.9% forecasted

According to the Economic Outlook, the unemployment rate will decline to reach 6.9% this year. “Latest official data demonstrate that the country’s overall activity rate or labour participation rate stood at 59.2% in the third quarter of 2017, with the female participation rate depicting a more worrisome rate of 45.2%.

On the other side, the economically inactive section of the population stood at 402,200 during this period, representing a rise of some 6,800 when compared to the third quarter of 2016 and of 10,900 relative to the second quarter of 2017.

Overall, such labour market trends are viewed as quite worrisome insofar as they threaten to impede our future economic development on the basis of the country being subject to proportionately lower factor inputs than it could have possibly afforded and, thus, missing out on a potential source of economic growth.” 

Inflation stands around 3.7%

Concerning inflation, MCB Focus reveals that headline inflation is expected to recede during the second semester of the current year. “Headline inflation is projected to stand at around 3.7% as at December 2018.

Overall, with a view to guarding against adverse nationwide economic effects, signs of building inflationary pressures deserve careful monitoring from a policy perspective, while concomitantly making allowance for other elements for informed decision-taking, especially the country’s still fragile growth trajectory and other considerations such as the persistent upward pressures on the rupee.

Of note, the IMF has highlighted the need to bring the headline figure down to historical norms of about 3%. In this spirit, it shed light on the requirement to establish a formal medium-term inflation objective to foster the successful implementation of a new monetary policy framework as well as better anchor policy actions and tackle inevitable trade-offs that can rise when implementing related initiatives.”

Main challenges

According to the report, the Mauritian economy remains exposed to an inquisitive sentiment on the heels of the persisting pressures on its real, fiscal and external sectors.

“In particular, the sub-optimal real GDP growth trajectory expresses the necessary grounds that the country has to cover in order to turn the corner. Against this backdrop and amidst the rapidly changing and exigent global landscape, the key salute for the country is to resolutely widen and deepen its economic transformation programmes, which should enable it to achieve desired socio-economic gains, alongside accelerating its graduation to the high-income nation league.”