Economic prospects for 2016

Statistics Mauritius downgraded its growth estimates for the third quarter of 2015. The economic growth in 2015 would be 3.4% against an initial forecast of 4.1%, according to its economic analysis published on its website on Wednesday, December 23. Statistics Mauritius attributed the drop to a sharp contraction in the construction activity, a decline in sugar production and a lesser increase in the manufacturing output. In 2016, the growth rate is expected to be at 3.9%. Is it a sign that the 4% threshold would not be reached before 2017? The MCCI Business Confidence Indicator reveals that the global economic climate has deteriorated in the third quarter of 2015 after a favourable first half. “The overall confidence index was down 3.6% and now stands at 95.9 points,” it says. No sector is spared. “The decline was widespread throughout our economy.” Raj Makoond: emphasis should be laid on investment According to Raj Makoond, Director of the Joint Economic Council, the fact that investments are in a difficult phase explains why economic growth would be less than 4% next year. “The rate of investment has known a decline in 2015 and investment in private sectors has also continued to decline as well as in the construction sector. However, the tourism sector has known some improvements. Some other sectors have the potential as well but much work is needed for that potential to be realised, for example, in the ICT sector and Renewable Energy sector,” he explains. Raj Makoond adds that the investment rate in many new sectors will continue to stay at low levels and have not picked up yet. “Those sectors have to be boosted. This will generate an important growth. For 2016, emphasis should be laid on giving a boost to investment.” Will the implementation of Smart Cities increase the economic growth rate? For the Director of the Joint Economic Council, two smart city projects which will be set up soon, namely the Education Village in the West of the island and the Eco City in the South, will contribute to higher growth rates. “I trust that at the level of the private sector, there will definitely be investment. Regarding the ICT sector, there are constraints in terms of redundancies. The capacity of the optical fibre should be increased and the broadband speed should be increased while prices should be reviewed downwards,” he utters. Raj Makoond points out that the government and the private sector are working together to materialise the projects announced in the Vision 2030 Economic Mission Statement. “If Mauritius wants its economy to improve, the running of its affairs should be more performing.” Ken Poonoosamy: Results are already palpable 2015 is considered to be a year of record when it comes to disinvestment. The 11 months ending in November, nearly Rs 4.3 billion has been divested from the Stock Exchange of Mauritius. Besides, for the 23 months spanning from January 2014 to December 2015, disinvestment amounted over Rs 5 billion. Moreover, foreign direct investment has also suffered. FDI, which reached Rs 7.2 billion for the first nine months of 2015, fell by 28.7% compared to the same period in 2014 (Rs 10.1 billion). In its editorial, Managing Director of the Board of Investment, Ken Poonoosamy describes 2015 as a year of tilling and sowing but 2016 as a year of first harvests. “Results are already palpable in certain areas, particularly in tourism. Austrian Airlines, Lufthansa and Turkish Airlines are already servicing the economy and the impact on the number of tourist arrivals has been significant,” he writes. Concerning the prospect for 2016, it will be characterised by the materialization of several large investment projects. “Several sectors will be promoted, namely smart cities, manufacturing, ocean economy, port development, property development and the SEZs in Africa.” The business climate will be improved through a series of reforms to attract more investment. Regarding the new Africa Strategy, collaboration with African investment promotion agencies will be reinforced so as to promote joint ventures. In 2016, the Rodrigues Investment Strategy will be implemented. “BOI will concentrate substantial resources in graduating key sectors of the economy, notably manufacturing, Freeport, agribusiness, ICT, renewable energy, and hospitality and property development. Based on present leads, calculations and realistic projections, these sectors are expected to garner FDI in excess of Rs 12 billion in 2016,” says the Director.

Employment

The Alliance Lepep Government announced the creation of around 15,000 jobs every year and they have announced their intention to create more jobs next year. Is it feasible to create more than 10,000 jobs in any given year? According to Statistics Mauritius, from the third quarter 2014 to third quarter 2015, employment increased by 6,800 to reach 536,500. Male employment increased by 900 to 336,000 and female employment by 5,900 to 200,500. Similarly, the number of unemployed persons have decreased from 1,000 to reach 42,600. Male unemployment decreased by 1,400 while female unemployment increased by 400. In the third quarter of this year, 17,100 males and 25,500 females were unemployed. It is estimated that among the unemployed, around 5,600 (or 13%) had not reached the Certificate of Primary Education (CPE) or its equivalent and a further 14,400 (34%) did not have the Cambridge School Certificate (SC) or its equivalent. Besides, around 34,100 (80%) had been looking for work for up to a year and the remaining 8,500 (20%) for more than one year. About 28,900 (68%) had work experience and 13,700 (32%) were looking for a job for the first time. According to De Long and Summers’s study (2012), as cited in the MCCI’s ‘Perspectives Economiques’ 2015, the structural unemployment rate is likely to increase during a cycle of low activity. The unemployed see their skills deteriorate, so their productivity and consequently their employability are reduced. The ‘Perspectives Economiques’ 2015 also explains that: “Since 2014, there has been a slight decrease in the unemployment rate due to the increase of our economic growth as well as due to a public policy to give employment assistance and training.”