- After a brief recession, real GDP growth has again reached sustainable levels in Mauritius, according to the latest estimates. The island's unemployment rate is however still rising as many export processing companies are finding the Mauritian price level becoming too high.
The International Monetary Fund (IMF) today published its latest analysis of the state of Mauritius' economy. Mauritian authorities and IMF staff late last month went through the country's economic performance and found that last year's negative tide had turned.
- Real GDP growth is expected to rebound to around 4½ percent in 2003/04, following a disappointing 2¾ percent in 2002/03 (July-June), the IMF said. This was largely reflecting the recovery of tourism and sugar production, the latter due to favourable weather, and continued strong construction and transportation activity.
However, high domestic production costs and increasing competition had continued to affect adversely the Export Processing Zone (EPZ) sector, which registered negative growth for the second consecutive year. The Mauritian unemployment rate has steadily been rising for the last five year, and continues to do so. Set at 7.7 percent in 1999/2000, it rose to 9.7 percent last year and to 10.2 percent in the 2003/04 fiscal year.
Analysing the economic achievements of the Indian Ocean island, the IMF today especially expressed "concern about the high and growing level of unemployment, especially among the unskilled." Further, it raised concern over the "uncertain medium-term outlook for a number of key economic sectors and the large stock of domestic public debt."
The Fund however noted "Mauritius' impressive social and economic achievements during the last twenty-five years, in particular the strong GDP growth, high level of domestic savings, and improving living standards." Mauritius is among Africa's richest and socially most equilibrated nations.
These achievements, according to the IMF analysis, "have been underpinned by the strength of public institutions, good governance, respect for the rule of law, a stable democratic system and a transparent regulatory environment - elements that will continue to serve the country well as it confronts future economic challenges."
The country however needed to safeguard these achievements, in particular regarding the growing public debt. There was now "a danger that public debt could become unsustainable as a result of continuing central government fiscal deficits," the IMF said. The public debt, which was around 66 percent of GDP in 1999/00, rose to about 80 percent in 2002/03, and is projected at 73 percent of GDP by end-June 2004.
Advising the Mauritian government, the IMF argued that Mauritius needed to "prepare for a more competitive global environment." Thus, authorities should focus on "implementing structural adjustments and reforms," especially in the sugar and textile sectors and the labour market, and on reducing persistent budget deficits.
- It would be important to press ahead in these areas while the economy is still performing well, and the public debt is manageable, the IMF team concluded. There was a need to "maintain fiscal discipline in the period leading to the general elections," the team added.
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