Following its review of the island economy, the International Monetary Fund (IMF) has estimated that its GDP will grow by 3.7% in 2014.
However, Mauritius can realise its economic potential only if an upward growth trajectory is maintained in seafood, Information and Communication Technology (ICT) as well as financial services sectors.
Martin Petri, who headed an IMF mission to the island from 22 January to 5 February, said on Wednesday that the economic situation in 2014 would be better than that of 2013. Incidentally, Statistics Mauritius has estimated that GDP grew at 3.2% in 2013, compared to 3.4% achieved in 2012.
He noted that the growth rate for 2014 is achievable if public investment is executed faster than projected or private investment accelerates.
Petri however mentioned that there are several challenges to achieving the estimated growth rate, such as reduction in public debt through a smooth medium-term fiscal consolidation path, improving the monetary policy transmission mechanism by removing excess reserves, pursuing public sector reforms while protecting the poor as well as addressing productivity and competitiveness challenges needed to raise medium-term economic growth prospects.
The economic expert credited Mauritius with maintaining a stable macroeconomic environment in 2013 despite difficult external developments.
Fiscal deficit having risen, partly owing to spending in response to the March flash floods, and larger than expected capital spending while inflation stood at a downwards trend, were mentioned as some of the external challenges that Mauritius grappled with successfully in 2013.
While the IMF estimated that inflation will remain subdued in 2014 at less than 4%, Petri stressed that the structural deficit of the current account was a major concern, especially as the economy faces moderate growth, low savings and shrinking markets in some export sectors.
To counter the current account deficit, Petri said policies should be adopted to encourage national savings and foster competitiveness that will require longer-term adjustments to reduce fiscal deficits and to help build human capital and infrastructure.
The IMF mission also expressed concerns regarding constraints in the water sector, and said it is ready to provide support to the Mauritian authorities to address the issue.
Historically Mauritius was a mono-crop economy based on sugarcane production, but is today a diversified economy driven by export-oriented manufacturing, tourism and financial and business services sectors.
In order to keep pace with the aggressive competition on the global market, the island economy has realised a remarkable economic transformation, attracting substantial investment from both local and foreign investors.
In recent years, Information and Communication Technology, Hospitality and Property Development, Seafood and Marine Industry and Biomedical sectors have also emerged to further diversify the economy.
The country’s membership in the Southern African Development Community (SADC) and the Common Market for Eastern and Southern Africa (COMESA), as well as its multiple bilateral agreements, give Mauritius-based firms preferential access to a number of African markets and hence hundreds of millions of consumers in these countries.
Now, the government’s objective is for Mauritius to rank among the top 15 most investment and business-friendly locations in the world.
Image (via Facebook): Martin Petri, who headed an IMF delegation to the island, said that the economic situation in 2014 would be better than that of 2013.