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AfricaMoney | October 17, 2017

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Slow but steady? Mauritius to be a high-income nation by 2025: MCB Focus

Slow but steady? Mauritius to be a high-income nation by 2025: MCB Focus

This crossroads comes at a juncture when the authorities have taken the decision to turn Mauritius into a high-income nation by 2020. (Image: MCB)

The MCB Group’s Focus edition noted that, contrary to what the authorities have to say, Mauritius is not ready to graduate to the high-income category by 2020 and is more likely to achieve that milestone by 2025 instead.

The largest lender on the island puts this delay down to prevailing impediments to the country’s economic performance in the wake of the soft global environment, besides challenges that are inherent to the island economy.

The report also notes that the real GDP growth of Mauritius is anticipated to stand at a below-par 3.3% in 2014, which is estimated to be lower than the 3.5% forecast by Statistics Mauritius.

The report outlined that Mauritius has made significant steps to improve its socio-economic progress to higher levels over the past decades.

Mauritius has widened its footprint and visibility on regional and international platforms, which has helped the island nation improve the quality of life of its residents over time.

According to the World Bank, Mauritius has been able to rise speedily from the low-income bracket to the upper-middle-income category.

“Nevertheless, the evolution of national output and income per head has decelerated in recent times, on the heels principally of the persistently testing global economic climate, with latest indications being that the challenging context should prevail in 2014,” cautioned MCB’s report.

This crossroads comes at a juncture when the authorities have taken the decision to turn Mauritius into a high-income nation by 2020.

However, the government’s forecast under the last budget that the island could become a high-income nation by 2020, entails an annual average growth of 5.8%, according to calculations carried out by the MCB.

And this difficulty in achieving a high-income status persists even as MCB’s forecast for the Gross National Income (GNI) per capita of Mauritius in 2013 has been readjusted upwards from the World Bank’s figure of USD 9,300 to USD 9,560.

It may be noted that the World Bank has based its estimation on the previous population series, while according to the new official Population Census, population estimates have been revised downwards.

It will be a challenge for Mauritius to get into the high-income category if the reform agenda remains in its current mode and the current sub-par growth trends continue, notes the report.

Therefore, the MCB has forecast that, with regard to Mauritius’ overall economic environment and dynamics, the island might transform into a high-income economy only by 2025.

This forecast is based, first on the assumption that the current sub-optimal trends being observed in relation to private investment, remain in force.

The second assumption is delayed execution of ventures outlined in the Public Sector Investment Programme, in line with historical trends. Also, there is a high probability that the GDP impact of sizeable infrastructure projects, under the Road Decongestion Programme and Light Rail Transit System, might not accrue just this year.

And, the third assumption is on merely marginal improvements in the utilisation of physical resources and total factor productivity outcome.

Mauritius’ investment ratio inching closer to 20% of GDP is not a good forecast for the economy over the short to medium term as it remains well under the 27-30% advocated to smoothly realise the country’s socio-economic objectives.

The MCB Group noted that the level of investment announced is deemed to reduce the unemployment rate, in particular among the youth and women, as well as boost the productivity and competitiveness of the economy on both regional and international forums.

“Mauritius needs to catch up on growth as delay in meeting economic forecasts has crept in over the recent years, during which growth has perceptibly undershot the average annual rate of around 5.5% registered in the years preceding the 2008 global financial crisis,” Gilbert Gnany, Chief Strategy Officer at MCB Group Limited, concluded.

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