Mauritius

Growth normalisation

Still largely underpinned by the preponderance of tourism (10% of GDP and 38.4% of exports in 2023), the main driver of domestic demand, economic growth will slow to a comfortable level in 2024, returning to pre-pandemic standards. This trend is set to continue in 2025, due to the expected slowdown in foreign demand, particularly from Europe and South Africa, partly offset by the vitality of the construction sector materialised by its transport infrastructure development projects (extension of the Metro Express, modernisation of the road network, port facilities, etc.) and tourist real estate (hotels, villas, etc.), as well as financial services. Between them, these two sectors account for the majority of investment, with the private sector dominating (17.1% of GDP in 2023) in the face of public financing and limited budgetary space. The dynamism of key export industries such as textiles (9.7% of exports in 2023), fishing (8.1%) and sugar (5.3%) will also benefit economic development. After the inflationary peak of 2022, caused by soaring world prices for mainly imported agricultural and energy products, the rise in prices is slowing down, accompanied by their easing and the restrictive monetary policy of the Bank of Mauritius, whose key rate that has been held at 4.5% since December 2022, should be cautiously eased in 2025, in the wake of decisions by the Fed and the ECB. Tourism, falling inflation and a drop in the unemployment rate (by 3 percentage points between 2020 and 2023, to 6.3%) will support private consumption (68% of GDP in 2023), while the government also intends to maintain its policy of protecting household purchasing power by subsidising certain basic products. The fact remains, however, that Mauritius is sorely lacking in skilled manpower to keep the economy running at its full potential, which is also undermining the competitiveness of its exports.

Setback for the public accounts and progress on the current account balance

Having made clear progress since the health crisis, the fiscal consolidation process is likely to experience a slight hiccup in the 2024-2025 fiscal year, in the middle of the election period, before resuming its course. The extension of subsidies on a few essential imported products (wheat, rice, domestic gas, etc.) and VAT exemptions on certain consumer goods will delay the consolidation of public spending. On the other hand, moderation in capital spending – mainly on housing, energy independence and adaptation to climate change – and revenues from economic growth will help limit the damage. Expected to rise slightly, the public deficit should be financed mainly by domestic borrowing, in line with the policy of controlling exposure to exchange-rate risk. The reduction in the weight of public debt as a percentage of GDP, of which less than a quarter is external, should slow accordingly.

The country's current account still shows a structural deficit, the consequence of a heavy trade deficit (25% of GDP in 2023), itself the result of heavy dependence on external supplies (oil, vehicles, cereals, etc.), reinforced by the country's insularity. However, falling commodity prices, expected to continue into 2025, and sustained growth in exports to Europe and Asia facilitated by the signing of free-trade treaties with India and China in 2021 should help reduce the imbalance. In addition, the strong performance of the tourism and financial services sectors will help narrow the current account deficit by 2025. The removal of Mauritius from the blacklists of tax havens in 2021 will stimulate FDI inflows, mainly for real estate, which will fuel the island's foreign exchange reserves, which will be stable and equivalent to 11.8 months of imports in May 2024. In addition, offshore companies (global business), attracted by the island's advantageous tax regime (a single tax rate of 15% and double taxation agreements with numerous countries), which makes the archipelago the “Luxembourg of Africa”, are helping to finance the current imbalance.

An election year without suspense

In office since January 2017, Prime Minister Pravind Jugnauth is expected to lead the ruling coalition Morisien Alliance to another victory in the next legislative elections, due to be held by the first half of 2025. The opposition, unable to reach agreement, remains fragmented and has little chance of winning. The stable macroeconomic outlook ensures that the government enjoys the support of the population, ruling out the risk of major social unrest over the period, with the exception of a few small-scale demonstrations organised by the opposition (especially in the run-up to the elections). However, the population, tested by the health crisis and recent episodes of high inflation, could give the outgoing coalition a smaller majority than in 2019.

Internationally, Mauritius continues to maintain strong ties with France, India, China and South Africa, its main economic partners. These ties are further strengthened by two free-trade agreements with China and India, which will come into force in 2021, and which will boost trade between Mauritius and the two major Asian powers. The main challenge for the small Indian Ocean archipelago, which is aiming for high-income status within the next ten years, is to adapt to climate change.

Last updated : July 2024