Mauritius Economy

BACK TO THE FRONT PAGE
BASIC INFO.
ECONOMY
GEOGRAPHY
GOVERNMENT
HISTORY
HUMAN RIGHTS
LINKS
NEWS
PEOPLE
shadow 
 

MAURITIUS
GDP (2003): $5.5 billion.
Real growth rate (2003): 4.4%.
Per capita income (2003): $4,484.
Avg. inflation rate (2003): 4%.

Budget: Income .............. $824 million
Expenditure ... $1 Billion

Main Crops: Sugarcane, tea, corn, potatoes, bananas, pulses; cattle, goats; fish .

Natural Resources: Arable land, fish .

Major Industries:
Food processing (largely sugar milling), textiles, clothing; chemicals, metal products, transport equipment, nonelectrical machinery; tourism.

NATIONAL GNP
Mauritius has one of the strongest economies in Africa, with a GDP of $4.5 billion in 2001 and per capita income close to $3,800. The economy has sustained high 6% annual growth rate for the last two decades--first driven by sugar, then textiles/apparel and tourism, and most recently by financial services. Independent assessments uniformly rank Mauritius as one of the most competitive economies in Africa. With a per capita income of U.S. $3,800, Mauritius is now classified as a middle-income country and ranks, on the basis of the recent Human Development Index for 173 countries, 67th globally, 40th among developing countries, and second in Africa.

Economic growth slowed down in 2001, falling to 5.8% from 9.3% in 1999, mainly as a result of a lower growth rate in the sugar and tourism sector. In 2002, the economy expanded by more than 4%, boosted considerably by increased trade through the Africa Growth and Opportunity Act (AGOA) legislation.

Over the past several years Mauritius registered balance-of-payments surpluses leading to a comfortable external reserves position (currently equivalent to more than 9 months of imports), an external debt service ratio of only 7%, and modest single-digit inflation on average. The inflation rate increased from 4.2% in 2000 to 5.4% in 2001. It is expected to reach 6.3% in 2002, owing to the recent increase in the rate of VAT from 12% to 15% as well as large increases in government spending.

However, the rising trend in unemployment and the deterioration in public finances are matters of concern. The unemployment rate rose steadily from 2.7% in 1991 to 9.2% in 2001, representing 48,000 unemployed people. It reached just above 10% in 2002. The budget deficit increased from 3.8% of GDP in fiscal year 1999-2000 (July-June) to 6.7% in FY 2001-02. As a result of a series of fiscal measures taken by the government, the budget deficit was expected to fall to 6% on FY 2002-03. However, the government's objective is to bring down the budget deficit gradually to about 3% of GDP by FY 2005-06.

While Mauritius relies heavily on exports of sugar, textiles/garments, and tourism, services like Freeport, offshore business, and financial services constitute other pillars of the economy. The offshore sector is playing an increasingly important role in the financial services sector and is emerging as a growth vehicle for the economy. At the end of October 2002, the number of companies registered in the offshore sector reached 20,111. The Mauritius Freeport, the customs duty-free zone in the port and airport, aims at transforming Mauritius into a major regional distribution, transshipment, and marketing center. The Freeport zone provides facilities for warehousing, transshipment operations and minor processing, simple assembly, and repackaging. At the end of October 2002, the total number of Freeport licenses issued reached 940, of which 230 companies were operational, mostly in trading activities.

There has been growing realization on the part of the government that the traditional industries of sugar, textile, and tourism are no longer capable of sustaining further wealth and job creation. Accordingly, the government is giving high priority to the development of the Information and Communications Technologies (ICT) sector with the aim of transforming Mauritius into a cyber island. The Business Parks of Mauritius, Ltd. was set up by the government to spearhead the development, construction, and management of major business and IT parks in Mauritius. It has secured a line of credit of $100 million from the Indian Government for the creation of the first cyber-city at Ebene, which is expected to be completed by December 2003. Already a number of renowned international firms engaged in software development, ICT training, PC manufacturing and call centers, are planning to start operations in the cyber city. Also expected to give a further boost to the development of the ICT sector are the recent operation of the Southern Africa Far East (SAFE) optical fiber cable and the liberalization of telecommunications services beginning January 1, 2003.

Although the near-term outlook for growth is encouraging, the challenges facing Mauritius in the long-term are daunting. On the domestic front, the decline in fertility and the aging of the population will decrease the available pool of labor for the economy, thus reducing the long-term growth potential. Also, before the end of this decade, the trade preferences and the market protection on which Mauritius has built its success will be eroded by the forces of globalizaton, liberalization, and economic integration. The elimination in December 2004 of the global quotas on clothing under the Multi-Fiber Arrangement will expose the local textile sector to competition from other exporting countries, including those in Asia and South America. In the case of sugar, ongoing negotiations between the European Union and sugar-exporting countries and future multilateral liberalization will likely reduce the profitability of the Mauritian sugar industry.

The government has taken a number of measures to prepare the country to face these challenges. With regard to sugar, the government has come up with a 5-year Sugar Sector Strategic Plan (2001-05), which provides for the restructuring and rationalization of the sugar industry, decreasing the number of sugar mills from 14 to 7 and reducing the current labor force of 30,000 by up to 7,000 through a voluntary retirement scheme. As far as the textile sector is concerned, the U.S.-Africa Growth and Opportunity Act (AGOA), which provides preferential access for apparel exports to the U.S. market, is expected to mitigate the negative effect of the elimination of the Multi-Fiber Agreement at the end of 2004. The AGOA also is seen as a good opportunity to diversify the sector by encouraging spinning and weaving operations and promoting regional integration of the local textile industry with other Sub-Saharan countries eligible for AGOA benefits.