Mauritius is an island state of about 1.25 million people (2021) located off the southeast coast of Africa, neighboring the French island of La Reunion. The country’s economy has made great strides since independence in 1968 and is now classified as an upper-middle-income economy. Its key challenges include managing the transition to a knowledge-based economy and adapting to the impacts of climate change.
Political Context
Mauritius is a multi-party, 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 in November 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. The next elections are scheduled for 2024.
Mauritius performs well on a range of political and economic indicators, relative to many countries in the region. Mauritius retained its first position out of 54 African countries in the 2020 Mo Ibrahim Index on African Governance despite a decrease of 0.5 points compared to a decade ago. Mauritius is also well placed in the Corruption Perceptions Index, ranked 52 out of 180 countries, dropping four places since 2012.
Economic Developments
Mauritius became a high-income country in July 2020 (based on 2019 data). However, the impact of the COVID-19 pandemic caused a slip back to upper-middle-income status in 2021. Despite its successful handling of the public health emergency, the economic impact was severe, and GDP contracted by 14.6% in 2020. GDP growth rebounded by a relatively modest 3.5% in 2021, and accelerated to an estimated 8.3% in 2022, supported by the strong tourism recovery despite headwinds from the COVID-19 Omicron variant wave and the war in Ukraine. %Growth is expected to moderate to 4.7% in 2023, negatively impacted by the slowdown in global demand, before converging to its long-term trend over the medium term. %
Headline inflation rose from 4% in 2021 to 10.8% in 2022 – the highest in over a decade – driven by external supply shocks stemming from the war in Ukraine, which increased the prices of energy and food products, of which Mauritius is a net importer. The current account deficit widened to 14.4% in 2022, and its financing will continue to depend on the financial and capital flows in the Global Business Companies sector. Seeking to control inflation, the central bank hiked the key repo rate six times between March and December 2022 by a cumulative 265 basis points, reaching 4.5%. Inflation is expected to moderate progressively over the medium term, tamed by tightening monetary conditions in major trading partners, while the rollout of a new monetary policy framework in January 2023 should aid in anchoring domestic inflation expectations.
Public sector debt appears sustainable, and the sovereign debt-carrying capacity is relatively high (estimated at 80% of GDP by the IMF), but contingent liabilities have risen sharply since the start of the pandemic and fiscal pressures remain elevated. The decline of the working age population and a rising dependency ratio will continue to put increased pressure on the social protection system in the coming decades, posing challenges to growth. Strengthening macro-fiscal institutions and pursuing a progressive fiscal consolidation, including through pension reform, will be essential to maintain debt sustainability over the medium and longer term. Addressing skill shortages and fostering a new generation of reforms to boost private sector innovation and support green adaptation will be key to developing new high-value sectors to regain and sustain high-income country status.
Last Updated: Mar 23, 2023
