There is trouble in paradise.
Last month, the Mauritius government said it will not be able to meet its target of one million tourists this year, due to continued economic tightening by Europeans, which make up the bulk of its international tourists.
The country has cut its tourist target twice from 990,000 to 980,000 this year and expects MUR 44.60 billion (USD 67 million) in tourism revenues, similar to last year's figures.
The country welcomed 965,441 tourists in 2012. The first six months of 2013 saw 471,664 tourists - or 1% higher compared to the same period last year.
Tourism makes up 8% of the country's economy and is a vital source of jobs.
"Given the strong links between Mauritius and advanced economies in Europe, the macroeconomic outlook remains vulnerable to the volatile external environment," said the International Monetary Fund (IMF).
"FDI inflows, tourism receipts and exports of manufactured goods to European trading partners are particularly important transmission channels for external shocks."
Mirroring the slow numbers, New Mauritius Hotel, a luxury operator, saw profits fall 30% to USD 19.17 million in the first nine months of the fiscal year, compared to the same period a year ago. The company said tourists also stayed away due to high air fare at a time of austerity in its key target markets of Europe.
Similarly, Sun Resorts also announced a pretax loss of USD 3.6 million in the first half of the year.
"Market conditions in the third quarter will remain challenging and we expect the same pattern experienced in the second quarter to persist," Sun Resorts said in a statement.
Investment bank African Alliance said in a report that average occupancy in hotels in the first half stood at 60%, compared to 62% during the same period last year.
"The CSO [Central Statistics Office] highlighted that Mauritius has underperformed its peers. Over 1H13 Mauritian tourist arrivals rose 1.0% y/y, which is anemic compared to Maldives (+17.8%), Sri Lanka (+13.1%), and Seychelles (+14.3%)," the bank said.
WEF LAUDS MAURITIUS
The grim figures came at a time when the country is being lauded by international observers for its strong regulatory standards and competitive economy.
The World Economic Forum has ranked Mauritius as Africa's most competitive economy, beating high-profile peers South Africa, Nigeria and Angola.
The country was ranked as the 45th most competitive economy in the world, a nine-place jump over last year's position.
The IMF expects the economy to grow 3.7% this year, and maintain a 4% to 4.7% annual growth trajectory for the next few years.
The trick for Mauritius will be to maintain its economic reforms in the face of headwinds from the global economy.
These reforms include further improving the public sector, and public utilities and improving productivity through investments in physical and human capital - failing to capitalize on the great start could pose risks for the country.
"These risks appear manageable in view of Mauritius' well-established track record as an economic reformer, with a dynamic private sector, sound macroeconomic fundamentals and robust institutions," the IMF said.
But more needs to be done.
"Public finance management and other structural reforms remain important to continuing strong governance outcomes and to enhancing competitiveness," said the African Development Bank (AfDB).
"A fall in the Transparency International Corruption Perception Index ranking from 39 in 2011 to 43 in 2012 (out of 183 countries) indicates a lack of public confidence in the government's anti-corruption efforts; particularly as prosecution of public figures charged with corruption have dragged on."
And while reform is central to Mauritius's prosperity, it must not lose sight of an unemployment situation that is slowly escalating.Joblessness stands at 8% in the country, but shoots up to 48% among workers under age of 25.
"Strong demand for skilled workers in the financial services, ITC, health care, and tourism sectors has offset some employment losses for the lower-skilled textile and sugar sectors, but the demand is partially unmet, which signals a skill mismatch underpinned by low education attainment," said the IMF.
The government is paying heed to these calls.
Prime minister Navin Ramgoolam announced an investment of USD 420 million in education, including free transport facilities for its citizens on September 3.
The country is also making efforts to import technology and skills, by signing a deal with India in marketing and financing in the micro, small and medium enterprises sector.
The 2013 budget also has a special consideration for job placements for those under the age of 25, which includes a youth employment program in partnership with the private sector.
"The most pressing longer-term challenge for Mauritius consists in enhancing educational attainment and vocational training of the young," the IMF said.
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