There is nothing free for the poor and middle class”
Interview: Sameer Sharma, Investment Analyst & Financial Risk Manager
* ‘We are using printed money and inflation to fund populist measures, which is what other banana republics have done in the past. They have all failed at this game’
* ‘There are too many candidates for prime minister and not enough realism on who this person should be’
Investment Analyst & Financial Risk Manager Sameer Sharma needs no introduction to our readers, and he is generally known not to mince words and call a spade a spade. As several other independent economists, he finds that the policies pursued before, during and after the pandemic have done little to strengthen the economy, increase its resilience or compensate the population for its sacrifices. This, he says, is a budget for the wealthy and well-connected which the smattering of handouts cannot disguise.
Mauritius Times: How do you see the Mauritian economy doing right now, and where will that lead us to. What do the fundamentals inform you?
Sameer Sharma: To know where we are going, we must first understand where we really are. If the data that we have about the true health of the economy does not make complete sense, in other words, when the radar itself is not completely reliable, it becomes complicated for any economist to tell you where we really are and where we are going. In fact, if we do not understand where we really are in the short-term business cycle relative to our long-term real potential trend growth of 3.2%, then the conduct of both monetary and fiscal policies becomes error prone.
When we think about GDP growth, there are two types of growths: real growth which excludes inflation, and nominal growth which includes both real growth (volumes) and inflation as measured by the GDP deflator which is a broader measure of inflation than that derived from the CPI basket. Given that GDP is not observable, we need to make estimates based on various assumptions. We use proxy measures of the change in prices across various sectors of the economy to come up with the change in the deflator for example.
Holding nominal GDP growth constant, an underestimation of the deflator would mathematically lead to an overestimation of real growth and vice versa. If we look at Statistics Mauritius’ real GDP growth forecast for the year 2023, it stands at 5% while nominal GDP is forecast to grow by 8.2%. This would essentially mean a very low change in the deflator which is more deviated than usual from the forecast level of CPI inflation. Keep in mind that the current CPI basket was derived from the 2017 Household Budget Survey and given what has happened since 2017, this basket itself suffers from significant biases and is likely now underestimating true consumer price inflation. Read More… Become a Subscriber
Mauritius Times ePaper Friday 9 June 2023
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