Economic and Financial Impact and Policy Responses
The economic and financial impact of Brexit on Mauritius was discuss in detail recently by Dr Rama Sithanen on lexpress.mu. According to Dr Sithanen, it is evident that Brexit has created a storm in terms of both economical and financial impact and this consequences on policy responses.
He further discuss the Brexit response under 4 headings.
- The direct and indirect transmission pathways
- The likely economic consequences
- UK trade options and access
- Articulating a viable response
1. The direct and indirect transmission pathways
Dr Sithanen commented that the transmission channels of how Brexit will affect an economy like Mauritius are well documented. They range from trade in goods to trade in services, from foreign investment to development cooperation, from volatility in currencies to changes in the stock market and interest rates, from immigration to remittances and finally from the contagion of Brexit on the EU and the world as growth, output and trade are impacted.
2. The likely economic consequences
Dr Sithanen provides 10 likely economic consequences and concludes with the following: “There will be both micro and macroeconomic ramifications. Firms will see a decline in earnings and profitability, resulting into job layoffs while the country will be adversely affected in terms of lower economic growth, declining foreign exchange earnings, deteriorating balance of trade and balance of payment with spillover effects on employment creation.”
3. UK trade options and access
Furthermore, he comments that Mauritius is a small non-LDC ACP country. This makes Mauritius vulnerable to UK trade policy options. The main threat is with respect to market access for our goods such as textiles and clothing, seafood products, sugar and fruits. Currently, Mauritius enjoy duty-free and quota free market access to all EU countries under the Economic Partnership Agreement. This also means preferences compared to exporters that face WTO-MFN tariffs. There is also the reassurance that our exports enter the market relatively hassle free. Trade preferences could be at risk as exports might be subject to tariffs or quota which would erode competitiveness. This all depends on the new trade arrangements post-Brexit.
4. Articulating a viable response
Finally, Dr Sithanen alludes to the fact that it is important to think and plan ahead in terms of policy responses to the Brexit fall out. Both with specific proposals to protect our vital economic interests and the appropriate forum – whether bilaterally, within a regional bloc, a pan African framework or a Commonwealth-wide FTA – to shape our future trade and other economic relations with the UK.
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