“M. le président, on parle d’incompétence du gouvernement et le FMI, hasard du calendrier, est venue pour préparer l’article IV à Maurice. Laissez-moi donc reprendre mot pour mot les conclusions de l’institution –"Mauritius is gradually recovering from the pandemic. …. Most sectors have returned to pre-pandemic levels of economic activity and the tourism sector is gradually recovering." .… Le PIB de 2022 devrait atteindre 520 milliards de roupies, contre 498 milliards de roupies en 2019, dépassant la barre historique des 500 milliards de roupies…...Enfin, et pour brosser un panorama complet de notre reprise économique, permettez-moi de préciser que notre trajectoire fiscale ainsi que le niveau de chômage à 7,8% en 2022 sont tous deux en baisse. …..”
Our Pada was so exhilarated that he ended up bursting out some wonderful blunders , bluffing as usual.
*1st Bluff : Pada is cheering at the nominal buoyancy; his policymakers will have to teach him how to separate the signal from the noise. In times of accelerating inflation, nominal variables have little informational value about underlying real quantities.
For example, as shown below in the table and accompanying graph, our nominal GDP in 2022 and 2023 are respectively 1% and 31% higher than in 2019. However, the level of real GDP in 2022 is about 5.4 % below pre-pandemic 2019. It is only after 2023 that our GDP, in volume or real terms, surpasses the 2019 level. In 2023, at Rs 369 bn, it was the same as in 2019.
*2nd Bluff: As the Mauritian economy continues to recover from the pandemic even as the Russia-Ukraine conflict has thrown up new challenges, most of our sectors have not returned to pre-pandemic levels of economic activity; most of our activities still remain below the pre-pandemic path. As I have shown in an earlier post, our level of exports, in volume terms, is still far off the level of not only 2019 but as far back as 2014. …..
Our exports in real terms in 2021 were Rs 54.9bn as compared to Rs 83.7bn in 2014 and Rs 69.4bn in 2019. Moreover, there is very little sign of the resilience of the sector; on the contrary we have every reason to worry about the declining strength of our export sector reflected in declining market share of our traditional exports and our exports of goods as a % of GDP which now stands at only 17% of GDP compared to 27% in 2014.
*3rd Bluff : That the unemployment rate will be 7.8% in 2022…If we stick to the published figures of Statistics Mauritius, the unemployment rate for year 2021 is 9.4% compared to 9.2% in 2020 still higher than the 6.7% of 2019. If we include the individuals and self-employed persons not looking for work that Statistics Mauritius classifies as (temporarily) inactive and not as unemployed, the unemployment figures are likely to be much higher. Youth unemployment is now much higher than the rising rate of 23% in 2019…
Mr Pada, do pay attention to the IMF recommendations, instead of bragging about dipping unemployment rates ! Why do you think that the IMF has recommended that Govt should consider policy options to reduce the shortage of suitably skilled workers?
Instead of the useless HRDC programs and worthless capital expenditures on prestige projects, we need a massive human capital formation programme -a more genuine programme than the mega Empowerment programme in 2007-8 that never materialised ….
*4th Bluff: Que notre trajectoire fiscale est en baisse’……The IMF WEO fiscal deficit for 2020-21 is estimated -10.9% of GDP, and is forecast to decline to- 7.2% of GDP in 2021-22. It decreases progressively but gets back to pre-Covid levels of around 2% of GDP only in 2026/27.
The consolidated budget deficit figures, however, shows the budget deficit is coming down but it is unsustainable in double digit figures at - 14.2% in 20-21, and -10.0% in 21-22, higher and still far off the pre-pandemic levels of -4.3% of GDP.
*5th partial Bluff: It’s a partial bluff, because when Pada claims that we are one of the few countries that deployed exceptional means , amounting to 32% of GDP to mitigate as much as possible the impact of the successive crises affecting the country, he omits to inform us that we were also one of the few countries to have recourse to massive monetary deficit financing (the only two other countries in Sub-Saharan Africa that carried out such CB financing were Democratic Republic of Congo and Ghana) to finance these expenditures.
The monetizing of the huge budget deficits has undermined the independence and effectiveness of the central bank’s ability to keep inflation under control. This has unanchored inflation expectations causing huge depreciation to our currency and hiking inflation to 11%- the third highest, after Sri Lanka and Pakistan, among some emerging market economies and peer countries.
A piece of advice to our Pada and his advisers for proper decision making and “pou pas fané divant”:
*3rd Bluff : That the unemployment rate will be 7.8% in 2022…If we stick to the published figures of Statistics Mauritius, the unemployment rate for year 2021 is 9.1% compared to 9.2% in 2020 still higher than the 6.7% of 2019. If we include the individuals and self-employed persons not looking for work that Statistics Mauritius classifies as (temporarily) inactive and not as unemployed, the unemployment figures are likely to be much higher. Youth unemployment is now at 27.7%, higher than the rising rate of 23% in 2019…
