Jump-starting the Economy
Reviving the global economy from an induced coma since the emergence of the Covid-19 in December 2019 has been brought very much to the front-burner. Economic activities were brought to a screeching halt affecting our daily lives and work. No economy came out unscarred from this global health emergency. With no clear policy prescriptions and sprouting new COVID-19 strains hanging like the sword of Damocles, it makes it a dauting task for economists and leaders around to navigate out of the woods.
Black Swan Event
Without any doubt, the COVID-19 pandemic has weighed heavily on all economies in a very unique way compared to the Great Depression and the global financial crisis of 2008 – this pandemic has been truly global. However, as we get of the shadow of the pandemic and the receding warm blanket of accommodative and fiscal stimuli, we should be careful not to jeopardise the recovery, allowing enough time for balance sheet repair.
Vitals of the Mauritian Economy
Recovery across economies has been asymmetrical with developing economies trailing behind mostly due to limited access to vaccines. In 2020, the Mauritian economy contracted by 14.9% and had an unemployment rate of 9.2% as per central bank’s estimates. Additionally, the Mauritian Rupee has depreciated vis-à-vis most of its major trading partner currencies (-5.8% against USD, -12.3% against GBP, -12.2 against the EUR) between the period August 2020 and August 2021 as per the Central Bank. As per the World Economic Outlook published by the International Monetary Fund (IMF) in April 2021, it has been forecasted that the Mauritian economy will grow by 6.6% in 2021 which paints a sanguine view about the recovery.
Resilient banking sector
As per the end of year financial statements of major commercial banks, profitability levels of banks are very near to pre-pandemic norms. Data from the central bank shows that despite a significant decline in economic activities, banks did not deleverage but actually, bank loans to corporations, households and other sectors increased year on year.
Tourism as pacemaker
With the opening of our borders as from October 2021 and easing of pandemic containment measures, the tourism sector is expected to be the catalyst for growth. After one and a half years of closed operations and historical lowest tourism earnings, the sector will add some much-needed momentum to economic activities. The Wage Assistance Scheme implemented by the Government has been really effective at preserving the jobs of thousands of people employed in the hotel and restaurant sector which could otherwise have escalated to massive lay-offs and ensuing costly social havocs.
The objectives of the policy response by Governments around the world were to provide the necessary support to weather out this storm and a safe bridge for everybody to the other side of the pandemic which remains foggy.
By Bhavish Ubheeram
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