Economic studies
Mauritius

Mauritius

Population 1.3 million
GDP per capita 8,827 US$
B
Country risk assessment
A3
Business Climate
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Synthesis

major macro economic indicators

  2020 2021 2022 2023 (e) 2024 (f)
GDP growth (%) -14.6 3.5 8.3 4.6 4.0
Inflation (yearly average, %) 2.5 4.0 10.8 9.5 6.5
Budget balance (% GDP) -10.4 -4.8 -4.7 -4.2 -4.0
Current account balance (% GDP) -8.8 -13.3 -13.5 -8.2 -6.0
Public debt (% GDP) 94.6 88.4 80.9 78.1 77.0

(e): Estimate (f): Forecast *Fiscal year 2023 = from July 1st 2022 to June 30th 2023

STRENGTHS

  • Stable democratic institutions and an excellent business climate
  • Strategic location between Africa and Asia
  • Thriving offshore financial sector
  • Modernisation and diversification of the sugar sector (industrialised refining, biomass plant, bioethanol)
  • Free trade agreements with China and India
  • Bilingual (English and French)

WEAKNESSES

  • Commercial, economic, and political dependence on Europe and Asia, especially China and India
  • Extreme dependence on food and energy imports
  • Island location, small domestic market and poor infrastructure
  • Lack of skilled workers and reduced competitiveness of exports
  • High unemployment rate among the youngest population (20% for the 16-24 age group at the start of 2023)

RISK ASSESSMENT

Tourism-driven growth

After a year of rapid economic growth in 2022, underpinned by the revival of tourism (20% of GDP in 2019), 2023 saw growth weaken on back of the effects of the slowdown in the economy and of demand in Europe, which is a key market for the island, as well as restrictive economic policy (especially monetary policy). Growth is expected to stabilise in 2024, though it will remain comfortable, still underpinned by the recovery, albeit more measured, in tourism, a strengthening construction sector, and expansion in manufacturing and financial services. The revival of exports (50% of GDP in 2022), mainly clothing (24%), fish products (14%) and sugar (9%), will also benefit growth. Private consumption (70% of GDP in 2022) will continue to benefit from the upturn in tourism, falling unemployment (peak of 10.5% in early 2021 to 6.7% in early 2023) and more moderate inflation. After soaring in 2022 in the wake of the explosion in global prices for agricultural products and energy, almost all of which were imported, inflation slowed in 2023, in step with easing prices. This trend was supported by the Bank of Mauritius whose main interest rate rose to 4.5% in June 2023, from 1.85% during the pandemic. Inflation should continue to contract in 2024 and monetary policy could be carefully loosened, in the footsteps of the FED and the ECB, while the rollout of a new framework in January 2023, including, among other things, a 2-5% inflation target, will improve its delivery. In addition, the government will continue to support household purchasing power by subsidising oil and certain food products. Furthermore, investment in fixed capital (19.3% of GDP in 2023) should remain relatively stable in 2024.

Moderating twin deficits

The budgetary situation, which has been badly affected by the pandemic, should continue to improve little by little thanks to the moderation of capital expenditure, which will focus on tourism and reducing energy and food dependency, as well as revenues from economic growth. Nevertheless, the increase in certain subsidies (petrol, food) and social assistance, including the increase in the minimum retirement pension scheduled for 2023-2024, will weigh heavily, especially as the Mauritian population is ageing. The dependency ratio (for those aged 65 and over) has risen from 0.4 pensioners for one active person to 0.5 in 2034. The public deficit will be reduced slightly, but will continue to be financed mainly by domestic borrowing. The ratio of public debt to GDP, a quarter of which is external, will follow the same trajectory.
The current account still shows a structural deficit, the result of a heavy trade deficit (28.8% of GDP in 2022) caused by the high dependence on external supplies (imports represented 63% of GDP in 2022) and by costly logistics resulting from insularity and the high level of global prices. However, the recovery of tourism, the development of exports to Europe and, increasingly, to India and China, with which free trade and double taxation treaties also support transhipment activity and financial services, should further reduce the deficit in 2024. In addition, the attractiveness of the island as a luxury destination and its removal from the Financial Action Task Force (FATF) and EU lists of tax havens at the end of 2021 will stimulate FDI (mainly in property and tourism construction, financial services and insurance). Global Business Companies (GBCs), attracted by favourable tax treatment, are turning the archipelago into the "Luxembourg of Africa": their profits "repatriated" in dollars are recorded as primary income and deposited in local banks. These inflows and their lower levels should make it easier to finance the current account imbalance.

 

Despite social tensions, the Prime Minister retains public support

The Alliance Morisien coalition, led by Prime Minister Pravind Jugnauth, held on to a comfortable absolute majority in the National Assembly following the 2019 legislative elections and should be re-elected in the next elections scheduled for 2024 against a weak and fragmented opposition. However, social tensions and protests are feared amid inflation, eroding living standards and corruption, and following the third postponement of the municipal elections (initially scheduled for 2023), which will finally be held in 2025.
Looking outwards, Mauritius will continue to maintain strong links with European countries, China and India, which are its main economic partners. The free trade agreement signed with China and the CECPA trade agreement signed with India, both of which came into force in January 2021, should help boost exports in the years to come.

 

Last updated: October 2023

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