Business updates

The MCCI released its Business Confidence Indicator for the 1st quarter of 2019 on Tuesday 14th of May 2019.

The latest quarterly business survey thus shows that business confidence continued to increase by 4.1 points in the first quarter of 2019, as compared to an increase of 8.2 points in the same quarter of 2018.

The economic barometer remained in the ‘upswing’ quadrant, showing an improvement in the current assessment of entrepreneurs, at 0.4 balance points as well as a brightening of expectations over the second quarter, at 8.2 points. This points to a gradual strengthening of the economy over the course of 2019, with an anticipation of a slight improvement in the world economic environment, as anticipated by the IMF in its April 2019 report.

Based on the business climate results, we estimate that the economic growth in the first quarter of 2019 was of 3.7 percent. Our econometric projection for the full year 2019 is that growth should be of approximately 3.9 percent.

In view of outstanding challenges related to skills mismatch, R&D and access to finance, the MCCI thus looks forward to the Budget 2019/2020 which has the potential to address a number of structural issues to the economy, with an approach towards a sustainable, inclusive and innovation-driven model of economic development. Mauritius should adopt structural support mechanisms for enterprises through enhanced access to credit, technological support to access R&D and Innovation, as well as support in adhering to quality certification and norms in order to access the regional markets. This should be coupled with enhanced support for quality training and skills development in order to address existing skills mismatches as well as a targeted opening of the economy to foreign talents.

Analysis by Sector and Size of Company

We notice that business confidence is driven by the commerce sector, with an increase of 8.2 balance points, reflecting continued improvements in household purchasing power and expenditure levels, with an increase in consumption expenditure, according to Statistics Mauritius of 3.3 percent in both 2018 and 2019, its highest level since 2008 as well as noted increase in investment by operators involved in the Commerce Sector. Business confidence in the services sector improved by 0.9 points, but is affected by downside pressures linked to weather disruptions, a decline in tourism arrivals from three main markets-  Reunion Island, the UK and China in the first quarter of 2019 as well as adaptation to the recent reforms and the phasing out of the grandfathering agreement on the India DTAA in the financial services sector.

We notice a decrease in confidence level in the industrial sector by 4.8 points on the back of continued slowing down of economic dynamism in the country’s main export markets (Europe, UK, South Africa) as well as fiercer competition in the globally competitive market, affecting the local industrial companies.

An analysis by size of the workforce of companies shows that larger sized businesses continue to lead business confidence, with an increase of 6. 5 balance points. There has been a slight improvement in small enterprises’ confidence level, at 1.6 balance points while we notice a modest weakening of 2.8 points for medium-sized companies, with a decline in turnover levels in the first quarter of 2019.

A number of downside risks remain including weather and climate change disruptions, as well as uncertainties in the global economic landscape linked to ongoing trade tensions, with the recent announcement of increased tariffs on Chinese products by the US.

Factors affecting Business Confidence

Demand remains one of the key engines of growth in the Mauritian economy, with more than 59 percent of entrepreneurs indicating that  an  increase  in  demand  has  been  one  of  the  most significant factors  affecting their businesses. The combined effects of the implementation of purchasing power policies over the last two years, has led to an improvement in the purchasing power of individuals with household consumption expenditure growing by 3.3 percent in 2018 and a similar rate expected for 2019 – its highest figure since 2008.

Nonetheless, some 44  percent  of  entrepreneurs  have  indicated  higher levels of competition in the marketplace as one of the constraining factors to growth. Indeed, entrepreneurs are faced with a highly liberalised economy, combined with  global competitiveness both on the domestic and external markets.

Investment in 2019

With expected improvements in the global economy during the second half of 2019, entrepreneurs, (at 53 percent) having delayed their investment plans, are now expecting a slight increase in their investment over the upcoming twelve months – April 2019 to March 2020. Such investments remain primarily in Plant and Machinery and Buildings, partly reflective of the boom in the construction industry in the past two years.

The proportion of investment in R&D expenditure remains modest. We anticipate that the upcoming Industrial Property Bill and the operationalization of a number of innovation-inducing measures in the Budget 2019/20 shall enable a further boost in such investments.

Employment in 2019

Employment is expected to continue to improve, albeit modestly, with 18 percent of entrepreneurs indicating an increase in employment over the next 3 months. The majority of enterprises, nearly 70 percent, are expecting to maintain their employment levels companies whilst some 13 percent are engaged in a restructuring and downsizing exercise and thus decreasing their employment levels. Unemployment rate, at 6.9 percent in 2018, is thus anticipated to continue to decrease slightly in 2019.

CES Ifo World Economic Indicator 1st Quarter 2019

According to the  CesIFO institute,  the  global  economic climate  deteriorated  in  the  first quarter of 2019, with a negative balance of -13.1 points. 

This analysis is in harmony with the latest forecasts by international institutions. The IMF confirms in its latest publication that the global economic activity has weakened with considerable uncertainties in the short term. The IMF favours a macro-economic scenario where the global growth rate, as measured by GDP, to increase by 3.3 percent in 2019. It has further reduced its global growth forecasts for 2019 by 0.4 percentage points below its October projections.

The full report is available here.