MCB: Mauritius continues search for solutions for socio-economic development
The MCB report highlights that the global business segment, an important pillar of the island economy, is subject to growing uncertainty over the Double Taxation Avoidance Agreement (DTAA) between Mauritius and India, even as increased investor interest in Africa helps cushions the detrimental effects somewhat. (Image: World Finance)
Mauritius continues to search for the right solutions to ensure robust socio-economic development, according to the latest economic outlook report by the Mauritius Commercial Bank (MCB).
MCB’s Focus observes that the island’s economic forecast has been kept unchanged due to dampened construction growth, and a slow implementation rate of policy measures designed to boost public investment.
The report foresees continued challenges for the sugar industry, quoting a report titled ‘Prospects for Agricultural Markets and Income in the EU 2013-2023’ to evidence a possible reduction in the price of sugar being sold in the EU from Euro 627 per tonne in 2013 to Euro 405 in 2023 after the abolition of the sugar quota in 2017.
On tourism, the report notes that “the industry should remain under close monitoring this year”, in light of total tourism earnings having declined by 8.6% in 2013 to around Rs 40 billion.
Moreover, the global business segment, an important pillar of the island economy, is subject to growing uncertainty over the Double Taxation Avoidance Agreement (DTAA) between Mauritius and India, even as increased investor interest in Africa helps cushions the detrimental effects somewhat.
Also, the gross domestic saving (GDS) to GDP ratio has gradually drifted away from the 25% mark during the early 2000s to an estimated rate of 11.8% in 2013, hampering the island economy as it struggles to achieve higher savings to boost infrastructure.
Thus, economic expansion is likely to be relatively modest and erratic for some time yet, as a result, mainly, of the high corporate debt burden, private sector deleveraging, tough credit conditions and fiscal policy tightening.
This is a source of concern for Mauritius as the demand for its goods and services would stay quite sluggish.
Accordingly, after factoring in a generally unchanged execution rate for public infrastructure ventures as compared to the average trend of previous years and only a gradual economic recovery in Mauritius’ main export markets, real GDP growth is forecast at 3.6% in 2014.
The country’s real GDP growth for this year should be supported by the notable performances of specific sectors, such as seafood and ICT, the report notes.
Besides, on account of its competitive spirit and sound fundamentals, the financial and business services industry should, once more, turn out to be a key contributor to the country’s real GDP growth.
Furthermore, with regard to the African continent – which is helping both the public and the private sector in Mauritius to expand and diversify the economy – it is comforting to note that growth in the sub-Saharan region would continue to be healthy in the near term at least.
Improved agricultural production and investment in natural resources and infrastructure are likely to underpin economic growth in the region.
Additionally, with regard to the island’s main export markets, growth is expected to improve and to be positive in the euro area this year, which is expected to spur progress of export oriented sectors such as textiles and tourism.
Also, according to the IMF, the growth of the world economy is predicted to improve to 3.6% in 2014 and further to 3.9% in 2015.
This evolution would, notably, be underpinned by the anticipated relative pick-up in advanced economies, with the latter expected to expand by 2.2% this year against 1.3% in 2013.
Finally, emerging market and developing economies, which are predicted to contribute to more than two thirds of global growth, have been facing challenges in domestic growth and external demand, resulting in slight downgrades in the global growth forecasts for both 2014 and 2015 compared to the figures put forward in January last.