As we slowly come out of the lockdown which lasted more than 10 weeks, there’s a strange mixed feeling. One of, where we are eager to get back to what we used to do, and at the same time a feeling that nothing will be back like before. And the confusion reigns as of to-date as to what the post-lockdown era will be. Whatever it is, life goes on.
However when it comes to the economy, the picture is definitely not pretty. Already before the Covid-Crisis, the Mauritian economy was on a slope downwards since many years and to be frank, over more than 10 years, we didn’t have a real captain in control of our ship. While they were busy fighting for survival, and by that I mean political survival, the Mauritian economy has been pretty much on automatic gear in the last decade. I am very convinced that if we didn’t have any Minister of Finance for the last 10 years, the economy would have done as good or even better. That’s telling isn’t it.
So let’s remember that prior to Covid-19, our economy was showing sign of acute weaknesses:
1/ continuous drop of our GDP growth rate whereby in 2019 we ended the year at 3.0% and not the 4.0% to 5.0% that we were promised
2/ Our government debt went up beyond 65% and that excluding other debts sitting in the books of our parastatal companies or guaranteed by the state in one way or the other.
3/ Our insatiable appetite for imports which continuously went up to reach the Rs200Billion mark
4/ Our exports remaining flat
5/ Our continuous trade and budget deficits as if deficits was in fashion
6/ Our foreign direct investment stagnating for years at the level of US$500M and yet most of that went to the real estate sector
7/ Our economic pillars all under structural stress be it sugar, textile, tourism and even financial services
8/ Our inability to have launched in any meaningful way new pillars. There’s been a lot of talks of blue economy, circular economy, tech-hub, education hub, medical hub, silver economy and so on. But all these remained theoretical talks with nothing to show tangibly as actions being implemented.
9/ Our private sector companies remained highly leveraged and backed by overvalued assets such as land
10/ Last but not least, continuous wastage of tax payers money in government approved projects which didn’t make sense and yet a total of Rs75Billion to Rs100billion has been spent in what I call stupid projects and just a plain waste of money.
Anyway, the past is the past, and we can do nothing about it, but I do hope we can take lessons learnt to carve out a better future.
Enter Covid-19. We only needed an invisible virus to bring our economy down to its knees like never before. In the global arena, we are seeing acute economic damages and our main markets (Europe) will be under due stress for many months and also years to come. For Mauritius we are going towards our double digit contraction and it will take us much longer to recover. Our debt to GDP will go beyond 80% and can even reach 100% with the possibility of an IMF bail-out. We will see an acute rise of unemployment, bankruptcies, and we will need to be careful that all these don’t lead to a risk to our financial system, being the banks. Indeed the banks are far more capitalised and stronger than during the crisis of 2008. But the domino effect that’s coming in this Covid-19 crisis, can lead to bigger and nastier surprises to our banks. Hence everything needs to be done to ensure this crisis doesn’t get to the heart of our economy. We have precedence in other countries like Greece, Cyprus, Argentina, and lately Lebanon. Let’s make sure we can defend and prevent that risk to ever get to our banking sector.
So overall, we will face a very tough ride ahead of us. At this moment, I estimate, it will take us 5 years to be back to where we were in 2019. That’s not bad, if we compare with Greece whereby after the crisis and downfall in 2008, still 12 years later, they have not yet reached their 2007 level!
Mauritians need to understand the reality of the economic situation and that we will all have to collectively share the economic pain, and just like a progressive tax system, it would make sense if that pain could also be felt in a progressive way, as those who are at the bottom of the pyramid are super exposed and the hardest hit. So those who are at the top of the pyramid, I would highly encourage that they take some of the weights that are on the shoulders of the most vulnerable. We need to prevent a social crisis at all cost and that can only be done if those who are on the top of the pyramid can for once come down “sur le terrain” and roll up their sleeves to provide some tangible help. As they say a successful company or individual cannot exist if the society around it is failing.
So this budget on the 4th of June has to be one which has to get every single Mauritian around one unifying project. That of burden sharing and rebuilding a better Mauritius. We saw how Mauritians got together at the last Jeux des Iles. It can be done if everyone chips in some effort. Collectively.
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