The Gross Domestic Product (GDP) growth rate is projected to increase to 3.7% for the year 2013, subject to a strong growth in the fisheries, information and communication technology and financial services sectors, says the International Monetary Fund (IMF) in its concluding remarks in the context of the 2013 Article IV Consultation mission in Mauritius.
At a press conference held yesterday in Port Louis, Mr Martin Petri, who is leading the consultation mission from 16 to 30 January, stated that this growth rate is achievable owing to prudent macroeconomic policies adopted in 2012 which have resulted in good fiscal and inflation outcomes.
For the year 2013, Mr Petri said that the challenge for Mauritius, according to him, is to accelerate growth and set the foundation for future growth, through increased public and private investment and productivity advances.
In his statement he underlined that compared to the year 2012, the external environment for 2013 is much better as the downside risks in the aftermath of the global financial crisis and the Euro zone crisis have decreased. According to him, though year 2013 is full of challenges to overcome, these factors will have less impact on the GDP growth rate in Mauritius and the economy is far from the worst case scenario of registering a growth rate of less than 2%.
Mr Petri also pointed out that while investment is likely to increase, driven by public investment projects, private investment is expected to remain subdued. In addition, he said that medium-term fiscal consolidation should continue to reduce external imbalances and economic vulnerabilities. As regards inflation, the mission noted that the current 4% rate is low but inflationary pressures could emerge in 2013 from wage pressures in the private sector as well as with an increase in public sector wages. As for the headline consumer price index inflation, the mission projects an increase to 5.7% on average in 2013 but cautioned the authorities to stand ready to tighten monetary conditions if inflation accelerates.
Other salient issues discussed in the course of the IMF mission are: the labour market issues where the IMF noted that the unemployment rate of 8% is high, the review of the current National Pension Fund system to ensure that its resources are adequate to pay pensions over the long run. In this context, Mauritius has already embarked on a project with the collaboration of the World Bank to develop pension models, added Mr Petri.
Similarly, Mr Petri spoke on low savings rate prevailing in Mauritius, which stands at 15% of the Gross Domestic Product (GDP) while investment has remained constant during the past year that is at 25% of the GDP. On this score, he recommends that policies should be adopted to encourage savings as according to the forecast of the IMF the persistently large external current account deficit reflects low savings and could give rise to future vulnerabilities. Hence, the mission suggested that this should be addressed through policies to promote national savings and foster competitiveness, which will require longer-term adjustments to reduce fiscal deficits and to help build human capital and infrastructure.
The mission also expressed concerns regarding the constraints in the water sector and the traffic congestion problem where the IMF stands ready to provide support and work together with Mauritian authorities to address the issues.
Mr Petri reiterated IMF’s commitment to assist Mauritius to implement its economic programme through the provision of technical support which the country is already benefitting from the Africa Regional Technical Assistance Center South (AFRITAC South) established in Mauritius since July 2011. The Centre is providing technical support to countries in the region for developing and implementing capacity-building programmes in several areas, such as macroeconomic policy, macro-fiscal policy and public financial management.
It will be recalled that in the course of the mission, the delegation met with the Vice-Prime Minister, Minister of Finance and Economic Development, Mr Xavier-Luc Duval, the Governor of the Bank of Mauritius, Mr Rundheersing Bheenick, senior government officials, as well as representatives of the National Assembly, the private sector and the civil society.
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