Despite external headwinds, especially sluggish growth in the Euro zone on which Mauritius is highly dependent for tourism, trade and foreign direct investment (FDI), the economy grew by 3.5% in 2015, similar to the 3.4% pace in 2014. Growth continues to be supported by tourism, information and communications technology (ICT) and the financial and insurance sectors, which grew by 8.6%, 6.9% and 5.2%, respectively. In contrast, the construction sector shrank for a second consecutive year (by 4.3%) and textile value-added also declined by 1%.
The current account deficit narrowed from 8.8% of gross domestic product (GDP) in 2014 to 7% of GDP in 2015, driven by a smaller trade deficit and lower net income outflows. The bulk of the current account deficit is structural, reflecting weaker private saving and reliance on capital goods imports, compounded by the slow recent growth of Mauritius’ main trading partners. The current account deficit continues to be financed largely by FDI (especially property, and hospitality services), and financial flows from the offshore corporate sector.
Monetary policy is cautiously accommodative, consistent with macro stability, but with the Bank of Mauritius also attempting to support stronger growth and a closing of the output gap. The repo rate was reduced by 25 basis points to 4.40% in November 2015 and has subsequently been left unchanged, facilitated by headline inflation falling to 1.3% in 2015, owing to low global commodity prices and persistent slack in the domestic economy. Fiscal policy also remains broadly expansionary as judged by primary fiscal deficits in 2014 and 2015 (0.4% and 1.6% of GDP).
Mauritius is a stable, multiparty parliamentary democracy, and changing coalitions are a feature of politics in the country. The president is the head of state and the prime minister has full executive powers and heads the government. The legislative elections held in December 2014 were won by the Alliance Lepep, a party comprising the Militant Socialist Movement (MSM), the Mauritian Social Democrat Party (PMSD) and the Liberation Movement. The coalition secured a comfortable parliamentary majority and now controls 51 out of 69 seats in the National Assembly, with the MSM founder, Sir Anerood Jugnauth, becoming prime minister. The coalition's decisive victory and firm legislative backing is expected to support political stability and gives it a strong mandate to implement its policy program. The 85-year-old Sir Anerood Jugnauth has held the function of prime minister for a total of 16 years since his first appointment in 1982.
In Mauritius, the President of the Republic is a non-executive official. On May 29, 2015, President Rajkeswur Purryag resigned and Vice-President Monique Ohsan-Bellepeau became acting president. On June 4, 2015, Dr Ameenah Gurib-Fakim was unanimously elected president by the National Assembly.
Mauritius’s main challenges include: increasing competitiveness through greater regional integration, creating a stronger environment for innovation, making growth more inclusive by addressing a scarcity of skilled human resources, and bolstering resilience to natural disasters and climate change.
Mauritius needs to accelerate reforms aimed at diversifying the economy, both in terms of deepening value chains in, and reorienting, exports toward emerging markets. Reforms with regards to trade barriers, education, and infrastructure will be crucial to achieving this. Moreover, the acceleration of fiscal consolidation is essential to achieving substantial efficiency gains in the budget and ensuring effective expenditure in priority areas such as the social safety net system, in order to cope with the impacts of a potential economic downturn.
Last Updated: Apr 04, 2016