The Mauritius Commercial Bank (MCB) has lowered its growth estimates for the current calendar year. The bank economists believe that the economy will be growing at a rate of 4,8% instead of 5,5% as initially forecasted. The bank’s latest Economic Outlook report highlights a bleaker than expected economic future.

The Mauritian economy is not catching up with the world economic recovery. The three main pillars of the economy – sugar, textile and tourism – are not doing as well as expected, and are all facing internal and external pressure. The sugar output this year will be around 590,000 tons, i.e., lower than the average yearly production of 620,000 tons. Prices on the European market are expected to come down. On the other hand, reforms in the sector have yet to lower costs to competitive levels.

Moreover, the tourist industry is in quite a gloomy mood. The newly introduced tourist arrival fee mentioned in the last Budget can have a bad effect on regional tourists who might turn their backs on Mauritius. This fee is yet another burden for an industry already in difficulty.

The growth in tourist arrivals is not very encouraging either as it might fall short of the target rate of 5.4%. Arrivals during the first five months of 2004 grew by a modest 0.1%, and it is feared that growth will hardly reach 3%. According to Patrice Hardy, the manager of Naïade Resorts, the main problem lies in the gap between demand and supply: the number of bedrooms continues to rise whilst there is still a lot to be done to boost up arrivals.

The Minister for Foreign Affairs and International Trade, Jayen Cuttaree, was in Geneva last weekend as part of a lobby mission in relation to the end of the Multi-Fibre agreement scheduled for January 2005. The impact of the abolition of garment quotas on the economy of countries like Mauritius was discussed. The dismantling will increase head-on competition from big producers like China or India. Failure to get the third country fabric exemption from AGOA (Africa Growth and Opportunity Act) will leave Mauritius with still fewer weapons to fight bigger producers.

The MCB appeals for substantial reforms. The economists are of the opinion that piecemeal solutions are not the way forward and that there should be a global approach to long-term decisions.