Located off the southeast coast of Africa, neighboring the French island of La Reunion, Mauritius is an island state of about 1.3 million people. The country’s economy has made great strides since independence in 1968, and is now classified as a high-income country. Key challenges include managing the transition to a knowledge-based economy and adapting to the impacts of climate change.
Mauritius is a multiparty parliamentary democracy. Shifting coalitions are a feature of politics in the country. The President is the head of state, while the Prime Minister has full executive powers and heads the government. General elections were held November 7, 2019. The result was a victory for the Mauritian Alliance (a coalition of the Militant Socialist Movement (MSM), Muvman Liberater, Alan Ganoo Movement and Plateforme Militante), which won 42 of the 70 seats. Pravind Jugnauth of the MSM remained Prime Minister.
Recent Economic Developments
The country’s gross domestic product (GDP) in 2019 grew 3.6%, driven by construction and services sectors (banking, ICT) as well as a rebound in agriculture. Manufacturing growth remained on a sluggish trend and was negatively impacted by decelerating global demand during 2019. This continued a pattern of structural transformation, with more knowledge intensive services sectors expanding while some of the sectors that have traditionally provided low-skilled employment stagnating or contracting. Based on its 2019 data, Mauritius was classified as a high-income country by the World Bank for the first time in July 2020.
The COVID-19 (coronavirus) pandemic is severely affecting the country’s economy through a standstill in tourist arrivals, crumbling export demand in particular for its garment sector, and the temporary lockdown measures adopted in April, May and June. While the spread of COVID-19 in the country was effectively stopped in April with no new domestic cases as of July 2020, GDP is expected to contract in double digits. The government put in place a support package to help the private sector cope with the shock, which mitigated the impact on employment, while in combination with declining revenue leading to a large deficit for the fiscal year 2019/20.
Mauritius faces the challenge of managing its transition to a knowledge-based economy, driven by innovation and productivity growth. This will require a concerted effort to remove bottlenecks to new sources of growth and private investment, such as a lack of connectivity, skills shortages, and misaligned incentives that will also be critical for its recovery from the COVID-19 induced recession.
While the trend may have recently been reversed, inequality has been on the rise for a number of years. Public transfers have contributed to mitigate the rise in total income inequality. While general unemployment was low pre-COVID-19 (6.9% in Q1 2020), women face a higher unemployment rate at 9.8%, and a much lower labor force participation rate.
Mauritius is highly vulnerable to tropical storms and the risk is amplified by climate change. A multi-hazard risk assessment completed in 2017 suggests that Mauritius experiences on average $110 million per year in direct losses from tropical cyclones and floods. Each year, there is a 1% chance of losses exceeding $1.9 billion, or 16% of Mauritius’ GDP. Mauritius lies within the cyclone area of the Indian Ocean. A large share of the population and productive assets in Mauritius are exposed to multiple risks from cyclones. Flood risk is continuously increasing. The frequency of storms of tropical cyclone strength (winds above 165 km/h) has increased significantly over the past three decades.
Last Updated: Jul 14, 2020