MCB Focus: Direct correlation between growth and exports slowdown

Net exports of goods and services are estimated to have r믭 off as high as 4 percentage points from the real GDP growth rate, last year. The latest MCB Focus delves into the country’s limitations when it comes to international trade.

The latest edition of the MCB Focus, titled Re-boosting our exports amidst intensifying international trade winds, analyses the trade performance of the country, and highlights the crucial steps to be taken up in that direction. The document highlights the fact that more recently, the Mauritian economy has found it difficult to sustain the momentum of its socio-economic progress. Indeed, the country faced a sub-par real GDP growth trajectory, with its average annual expansion rate undershooting the historical level on the back of global uncertainties and domestic imbalances. “Net exports of goods and services is estimated to have r믭 off as high as 4 percentage points from the real GDP growth rate last year, while its contribution thereof is likely to stand at only 0.5 percentage point in 2016 as per latest assessments”, highlights the document.

The share of total exports and imports of goods and services to national output, which stood at above 120% in the early 2000s, witnessed a downtrend over time to reach around 110% in 2015. In essence, the report identifies and investigates the importance of exports of goods and services as a key underpinning of the economic expansion of Mauritius.

Indeed, pursuant to the slowdown in our exports of goods and services, the country’s real GDP growth declined to attain 3.6% on average during the 2011-2015 period. Prior to that, real GDP growth stood, on average, at 4.7% during the 2006-2010 period, despite being impacted by the global financial crisis. The latter figure was an improvement from the growth rate of 3.3% witnessed during the 2001-2005 period when a corresponding slump was observed in the domestic exports of goods.

Several key factors have impacted our trade performance over time, while several key measures have been adopted to support private sector activities as well as expand and diversify their international footprint. These include steps such as liberalisation of trade and investment as well as mobilisation of foreign direct investment; securing of international market access by means of bilateral and multilateral agreements; enhanced business facilitation frameworks (e.g. enactment of legislations pertaining to the labour market and insolvency of enterprises, simplification of business registration procedures, and upgrade of infrastructure set-up, notably in relation to the road and airport networks) and so on. While it is no surprise that other factors have hindered our recent trade expansion, such as the international landscape. “Importantly, the performance of the Mauritian economy should be examined in the context of the general slowdown in global trade growth since 2012,” notes the latest MCB Focus.

Impact of structural bottlenecks

Domestic imbalances have contributed to this deterioration as well, since, according to the document, structural bottlenecks are, in recent years, deemed to have inhibited some economic sectors in their quest to improve their intrinsic productivity levels, promote cost-effective outputs, judiciously tap into openings for sustained activity growth as well as expand and diversify their market space. The limitations, especially, relate the ease of doing business climate and the business facilitation framework, institutional quality, labour market flexibility, the physical infrastructure set-up and techno-logy absorption.

The 65^th edition of MCB Focus thus underlines that by amplifying the impact of other types of structural reforms and rekindling the idiosyncratic productivity of the country’s resources, measures to boost and diversify our exports of goods and services should go a long way in laying the ground for strong growth and raising it towards its potential level in the short to medium term; and uplifting the growth potential to over the 5% mark over the long run. “In fact, Mauritius would benefit from the adoption of a pro-growth export strategy and the pursuance of its Africa Strategy, which should spell out its ambition to resolutely adapt to an increasingly difficult global context and equip itself with the necessary means to s쳮d,” suggests the document.