Our Economic fundamentals
We are already grappling with a large external current account deficit and stagnant growth. Savings are dismally low, and the improvement in the investment rate remains modest. While public investments have recovered, private investments are dipping. Inflation remains subdued mainly on account of depressed prices of commodities and oil internationally and employment creation is poor and under-employment is significant.
The financial services sector, the topmost contributor to growth, is increasingly vulnerable to the implementation of fast-changing global tax and transparency standards. Manufacturing, Tourism, Sugar, and other export sectors are floundering. The Medium and Small-Scale Enterprises (MSMEs), the backbone of multiple sectors of the economy, are still suffering from the combined consequences of generous wage awards and low productivity. Any adverse shock leading to a sharp reduction in capital inflows would send the balance of payments into potential difficulties. Some ominous signs have begun to appear. The balance of payments surplus in 2018 was lower at Rs16 bn compared to Rs28 bn in the previous year
The widening external imbalance and the worsening of external competitiveness remain major sources of concern. In the event of a marked slowdown in capital inflows, sharp adjustments in the value of the rupee are becoming inevitable.
Populism and reform
At a time when the economic indicators are ringing a loud alarm bell, the government's primary goal should be setting the basics right instead of going ahead with "band-aid" programmes and patchworks as announced in its Government Programme 2020-24.
Knee-jerk reactions are not the way to formulate policies. The decision-makers have to think ahead – think in terms of a 10-20 year vision. This is the only way that a nation can initiate structural and critical reforms in all the main sectors of the economy – agriculture, manufacturing, tourism , financial services and the ocean economy.
But current decisions are still being viewed through political lens rather than economic ones. With their little popular support there is the risk that they will not have political nerve for a reform drive . They are more likely to jettison potentially risky economic change to preserve some populist electoral appeal; anyway they never had a strong appetite for reform
But too much is at stake for Mauritius to risk its economic reforms foundering on the rocks of populism. The Mauritian economy needs reform. For too long it has prioritised consumption over productive investment, short-term financial returns over long-term innovation, rising wages over productivity, and high budget deficits over the quality of public services. We have already waited inordinately long to put government finances on a sustainable footing. If we miss the opportunity now, the window for change will close, perhaps for years. Our medium- and long-term weaknesses are ticking away like time-bombs. The economy needs to be shocked out of its longstanding complacency. It’s not new institutions, but government’s commitment and determination that hold the key to unlocking a crucial driver for change. This government should keep his nerve and seize the chance to change.
