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 in 2022, caused by soaring world prices for mainly imported agricultural and energy products, the rise in prices is slowing down, accompanied by the cautious monetary policy of the Bank of Mauritius, whose key rate – cut from 4.5% to 4% in September 2024 – should ease further 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 stall in the 2024/2025 fiscal year, due to the election, 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. Public debt as a percentage of GDP, less than a quarter of which is external, should stagnate 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.

Democratic changeover

In office since 2017, the former Prime Minister, Pravind Jugnauth, and his allies suffered a resounding defeat in the October 2024 general election, at the end of a campaign marred by a large-scale phone-tapping scandal. Quick to concede defeat, Jugnauth handed over his seat to Navin Ramgoolam, a position Ramgoolam had held twice before, and his Alliance of Change, with 60 of the 70 seats in Parliament. The changeover and the peaceful transition that followed the elections demonstrate, once again, the good health of one of the few true democracies in Africa.

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.

October 2024 also saw the turning of one of the last pages in British colonial history, with the handover by the United Kingdom of the Chagos Islands, an isolated archipelago in the northern Indian Ocean. Mauritius had claimed sovereignty over this group of atolls since its independence in 1968. In exchange, Mauritius allows London to exercise its sovereign rights over the main Chagos atoll, Diego Garcia, which hosts a joint military base with the United States, in return for rent, for an initial period of 99 years.

Last updated : November 2024