Africa-Press – Mauritius. Rajeev Hasnah, Chartered Financial Analyst with degrees from the University of Mauritius and Warwick Business School, gives his independent take on the difficult economic circumstances and glum perspectives facing the country as it pursues policies of high spending in projects with minimum returns, growing deficits in government budget and current account balance, a reliance on printing monies, a low credibility and independence of the central bank, with shortages in forex and continued pressures to keep devaluing the national currency.
All of these factors do not bode well for juggling inflation or the country as higher nominal rupee revenues from taxes and VAT are being wasted in unproductive spendings. The IMF warnings and recommendations may well fall on deaf ears, as authorities seem trapped in their policies.
Mauritius Times: The IMF comments in its last Article IV Consultation that ‘economic growth has started to recover, with most sectors broadly back to pre-pandemic output levels, except tourism, where activity remains subdued’.
It adds that ‘staff projects real GDP growth of 6.1 percent in 2022. The economic rebound is expected to be driven primarily by the tourism sector with tourist arrivals expected at 60 percent of pre-pandemic levels’.
The IMF’s assessment of the economic situation does not sound too worrisome for the state of the economy in the short- and medium-terms, but we understand that specialists in finance think differently.
Why is that so? Rajeev Hasnah: The GDP growth forecast for 2022 is a short-term and limited perspective to assess whether an economy is faring well, though it is undeniable that GDP growth is a major indicator.
The 6.1% growth rate is reflecting a move towards pre-pandemic levels and hence it still has an element of a low base effect embedded into the forecast GDP growth rate.
Moreover, after 2022, should the real GDP growth rate move back to the previous 3% range, the scope for moving away from a middle-income trap development phase will be further reduced. Several other economic indicators that are still flashing red are also worth highlighting:
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