Mauritania is a mostly desert country, with a population of about 3.5 million and a gross domestic product (GDP) per capita of about $1,170, according to 2013 data. As in many African countries, Mauritania’s recent mineral discoveries have stimulated growth and raised incomes. In 2103, Mauritania exported more than 13 million tons of iron ore valued at about $1.4 billion, making it the second largest exporter in Africa. Iron ore output is expected to increase to 18 million tons by 2015. Mauritania also exports gold and copper, and has significant potential for increased mineral production. In addition, Mauritania has become a modest offshore oil producer, with offshore gas production expected to start in 2015. Mauritania’s waters have some of the most abundant fish stocks in the world.
Mauritania is emerging from a series of internal shocks that deeply affected its political environment and weighed heavily on its economic performance. After a bloodless military coup in 2005, followed by a return to democracy with elections in 2006-2007, the new government engaged in constructive dialogue with development partners and Mauritania was granted debt relief under the Highly Indebted Poor Country Initiative (HIPC) and the Multilateral Debt Relief Initiative (MDRI). However, in August 2008, the civilian president elected the previous year was removed from office in another military coup. The political crisis led the international community to put most of its activities in Mauritania on hold. The World Bank, in accordance with the operational policy and Bank procedure OP/BP 7.30 on “dealing with de facto governments” also suspended its activities. In September 2009, the World Bank started reengaging with Mauritania following a presidential election which established a national unity government and resulted in the lifting of international sanctions.
Recently, Mauritania has enjoyed political stability; however presidential elections due in May-June 2014 may lead to heightened tensions.
Poverty still affects a major part of Mauritania’s population, particularly in rural areas. The main constraints to poverty reduction are the following: a weak rural economy, a dependence on capital-intensive sectors such as mining and industrial fishing, a political economy which works against the fair distribution of resources, and a vulnerability to both environmental and economic shocks, which put the poor at an even greater risk of food insecurity and malnutrition. According to the latest available 2008 household data poverty assessment, poverty declined slightly from 46.7% in 2004 to 42% in 2008, which makes the 2015 target of 25% difficult to reach. Mauritania’s human development index has moved up from 0.424 in 2007 to 0.453 in 2011, compared to an average of 0.463 for sub-Saharan Africa.
Mauritania continues to enjoy macroeconomic stability, mainly thanks to a buoyant mining sector. Real GDP grew at roughly 6.7% in 2013 and is likely to see sustained growth around 6.5% in the next three years. GDP per capita in 2013 is estimated at roughly $1,170, confirming Mauritania as a lower middle income country. Historically high international prices of raw materials in 2010 to 2011, combined with prudent policies, helped the country to consolidate macroeconomic stability, strengthen international reserves, and increase fiscal space. After deteriorating sharply in 2012, the current account (CA) slightly improved in 2013 due to a lower-than-expected trade balance deficit. A decrease in imports in 2014 is expected to favor a positive trade balance, thus contributing to further improving the CA deficit. Exports volumes are mostly unchanged and are expected to remain steady over the medium term. Iron ore remains the driving force of the economy, with production expanding over the course of 2013 and predicted to continue growing. The expansion of gold mining has been put on hold due to the falling world price of gold. Offshore gas production is expected to start in 2015, supported notably by the World Bank Gas-to-Power project. In October 2013, Mauritania ratified the Fishery Protocol with the European Union, and negotiations for a new protocol have begun.
The overall fiscal balance fell from +2.9% of GDP in 2012 to -1.1% in 2013, due to a contraction of the grant component. Fiscal balance is expected to turn back positive in 2014. Fiscal consolidation was strengthened thanks to high levels of mining revenues, coupled with improvements in tax collection, and better fiscal viability. Total revenues doubled over the course of 2009 to 2013, reaching $1.25 billion; while inflation normalized at a lower-than-expected 4.2%. In 2013, foreign reserves remained high at over 7 months of imports.
Overall macroeconomic prospects for 2014 and the medium term are positive. GDP growth is projected to be sustained at 6.8% in 2014—driven by the mining industry, construction, and foreign investments—and to average 6.5% between 2014 and 2016. After a peak in 2012, public spending is expected to stabilize around 35% of GDP during the period 2014-2016. The overall fiscal balance, including grants, is expected to be slightly positive during the same period. Capital expenditures will soar in the medium term, reaching an average of 14% of GDP while current expenditures are expected to continue their decreasing trajectory, to stabilize around 20% of GDP in the period 2014-2016.
While Mauritania faces multiple development challenges, three major and interrelated challenges stand out: (a) lack of inclusive growth; (b) lack of competitiveness; and (c) poor governance.
Lack of inclusive growth
Mauritania’s lack of inclusive growth has two main aspects: First, the country’s current growth drivers—the extractive industries—are concentrating wealth at the top while producing few employment opportunities. Second, the agriculture and fishery sectors, which account for the largest share of the workforce, are declining due to climate change, leading to an increase in food insecurity in rural areas and to the expansion of urban slums populated with unemployable rural migrants.
Lack of competitiveness
Mauritania’s competitiveness is hampered by a small formal economic base, a declining manufacturing sector, limited diversification, and a weak legal environment. By the mid-2000s, fewer than 250 formal firms of more than five employees were active in manufacturing and retail trade according to 2007 World Bank data. In 2011, manufacturing and handicrafts accounted for 3.7% of GDP compared to 8-9% in the mid-1990s. The narrow manufacturing base has reinforced the dominance of large business groups, which have crowded out small and medium enterprises (SMEs).
The quality of governance in Mauritania declined significantly over the last decade, and poses a serious challenge to equitable growth and economic resilience. Governance and oversight are critical in the mining sector as well as in the state-owned enterprise (SOE) sector. Governance is also the key to strengthening social resilience to shocks, in particular through improved service delivery in the Millennium Development areas of maternal health, child mortality, and hunger alleviation.