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Mauritius

Mauritius

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Key Facts

  • Capital: Port Louis
  • Region: Southern Africa
  • Official languages: English
  • Independence Day: March 12, 1968
  • Area: 2,000 sq km
  • Population (2018): 1.3 million
  • REC membership: COMESA, SADC
  • WTO membership: January 1, 1995
  • GDP (2018): US$ 14.22 billion
  • GNI per capita (2018): US$ 12 050
  • Currency: Mauritian rupee

Economic overview

Real GDP growth was moderate yet steady, averaging 3.8% during 2015-19. Growth was mainly driven by financial services, retail and wholesale trade, and information and communications technology. GDP per capita trended upward, reaching an estimated $10,200 in 2019 – the third highest in Africa after Equatorial Guinea and Seychelles. The economy is largely service-based (76% of GDP in 2019), followed by industry (21%) and agriculture (3%). Aggregate demand has been underpinned by strong growth in household consumption, while investment stood at 19% of GDP in 2019.

The accommodative monetary policy of the Bank of Mauritius has been widely considered appropriate in view of recent low inflation. Fiscal policy was expansionary over 2015-19: government spending is dominated by recurrent spending, but the public wage bill is increasing, and a more generous universal pension scheme has been introduced. Spending has been offset by a rise in revenues, driven by strong tax collection. The budget deficit, 3.2% of GDP in 2019, is funded predominantly from domestic debt issues and ongoing disbursement of a $500 million grant from India in 2016. Fiscal consolidation is required through increasing domestic resource mobilization and the sale of government assets.

The current account deficit, estimated at 6.3% of GDP in 2019, is projected to narrow to 5.6% of GDP in 2020 and 5.2% in 2021, due largely to improved export and tourism earnings. The current account deficit will continue to be covered by investment income from offshore companies and foreign direct investment.

Youth unemployment is 22.5%, and national unemployment is 6.9%. The rapid shift from labor-intensive sectors to emerging high value-added sectors requires higher skills. Inequality has recently been on the rise.

Key sectoral drivers of growth are expected to continue performing well. Real GDP growth is projected to be 3.9% in 2020 and 4.0% in 2021, due to increased tourism, steady investment growth, and external demand from regional and global growth. Tourist arrivals are projected to exceed 1.2 million a year, with more coming from nontraditional markets in Asia and Africa. The economy is expected to diversify further into higher value-added sectors such as agroprocessing, medical tourism, higher education services, and development of the ocean economy. Ocean economy activities such as leisure, energy, aquaculture, and port logistics could add 1.5–2 percentage points to GDP.

The effort to increase efficiency and productivity in public services could include digitizing the economy, as in fintech and artificial intelligence. A favorable business environment and business-friendly regulations such as the revised Business Facilitation Act are expected to boost foreign direct investment inflows, and improved global economic demand should increase the export of goods and services. Government efforts to reorient Mauritius as a gateway between Asia and Africa for trade and investment and to further diversify export markets will consolidate the country’s position as a logistics and services hub for Africa and boost the wider economy.

Global energy and food price increases are expected to diminish the island economy’s current account balance and add to inflation, projected at 3.5% in 2020 and 2021. Public debt remains high at 63% of GDP, and a statutory target of 60% of GDP by 2021 will limit the fiscal space for investing in infrastructure and human capital. Although the financial sector is among the most robust and best regulated in Africa, it caters mostly to large corporations. Small and medium enterprises continue to find access to finance a challenge. Other risks to growth potential include skill constraints, environmental degradation, a rapidly aging population, and widening income inequality. Efforts to speed much needed public investments and improve public service delivery could falter due to institutional and regulatory constraints. Private investment in strategic infrastructure subsectors such as water, transport, and energy is expected to remain low given the lack of significant regulatory reforms.

Last updated: April 2020