The rise in income inequality combined with lagging shared prosperity indicators have adverse impacts on relative poverty in Mauritius, says a World Bank report launched today. The report, titled Inclusiveness of Growth and Shared Prosperity, analyses Mauritius’s growth pattern of the past decades as well as existing opportunities to accelerate progress toward achieving inclusive growth and shared prosperity.
“We believe Mauritius has what it takes to achieve its ambition of becoming a high income country with the implementation of the right set of reforms,” said Mark Lundell, World Bank Country Director for Mauritius, Mozambique, Madagascar, Seychelles, and Comoros. “Reaching high-income status will imply a careful review of the country’s economic model. This includes the ability to improve the labor force skills set, develop infrastructure, and further improve the business environment to attract FDI and generate domestic investment.”
The nature of the economic changes of the 2000s associated with the deterioration of the traditional primary sectors led to an increase in income inequality, which impacted negatively on shared-prosperity indicators in the country. Furthermore, incomes of the bottom 40 percentile of the population deteriorated in relative terms. The report concludes that economic growth and declining inequality are equally important for the reduction and possible eradication of poverty in Mauritius.
“Inclusiveness of growth remains the main challenge for the current growth pattern in Mauritius,” said Victor Sulla, World Bank Senior Economist and main author. “Micro-simulation analysis suggests that reducing and eventually eradicating poverty in Mauritius will depend on a two-fold combination of policies: first, lower unemployment and increased productivity, and second, improved targeting and efficiency in social protection.”
Policies designed to upgrade infrastructure, support research and development and innovation, advance public-sector efficiency, and further improve business environment are deemed key to boost productivity. The report suggests that the labor market needs to foster flexibility and reward higher productivity. Besides, skills mismatch grew by 30 percent during the years 2000s, signaling an urgent need for policies to support high-tech and services-oriented sectors. Educational reforms are therefore needed to provide people with the appropriate and relevant skills needed in today’s Mauritius.
The report further suggests the need for public-sector reforms to improve accountability at all levels and improve planning, procurement, and management processes across the system. Efficient country-level monitoring and evaluation systems could be developed to further support evidence-based policymaking. Reforms in public enterprises also have the potential to create fiscal space for productive spending.