Economic Studies
Mauritius

Mauritius

Population 1.3 million
GDP per capita 9,999 US$
A3
Country risk assessment
A3
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Synthesis

MAJOR MACRO ECONOMIC INDICATORS

  2013 2014 2015 (f) 2016 (f)
GDP growth (%) 3.2 3.6 3.4 3.8
Inflation (yearly average) (%) 3.5 3.2 2.0 2.8
Budget balance (% GDP) -3.5 -3.2 -5.0 -6.0
Current account balance (% GDP) -6.3 -5.6 -6.0 -6.5
Public debt (% GDP) 53.9 56.2 56.0 56.0

 (f) Forecast

STRENGTHS

  • English/French bilingualism
  • Robust banking system
  • Effective democratic institutions and governance
  • Favourable business climate
  • High tourism potential

WEAKNESSES

  • Infrastructure shortcomings in some regions
  • Shortage of qualified labour
  • Public monopolies and subsidised prices in several sectors
  • Commercial and economic dependence on Europe (tourism, construction)

RISK ASSESSMENT

Activity is highly dependent on European demand

The Mauritian economy, organised around four key sectors (tourism, textile, sugar, finance) is outweighed by services (more than 70% of GDP). The island’s activity is highly dependent on that of European countries, where two-thirds of the tourists come from. The moderate growth in Europe should continue to boost the tertiary sector moderately, while the efforts to diversify aimed at attracting travellers from other countries, especially from Asia, are slow in producing their effects. The manufacturing sector is likely to remain hampered by the energy supply problems as well as by the rise in wages which is weighing on the competitiveness of local industry.
However, the relatively expansionary fiscal policy should boost household demand. Private and public investments, encouraged by government measures, should also contribute to vigorous growth. The huge plan to create smart cities, aimed at creating urban zones that combine workplaces, housing and leisure, could in particular attract local and foreign private investors.
The inflation rate could accelerate slightly in 2016 under the combined effect of stronger local demand, a more flexible monetary policy (rate cut in November 2015) and a slight increase in food prices. The price control measures for certain products and the fall in the price of petrol decided end-2015 should nevertheless dampen the pace of the price rises.

 

The fiscal and current account deficits could increase but remain moderate

The fiscal deficit should worsen in 2016 because of the increase in spending announced by the government. The commitment regarding a reduction in inequalities will in particular be reflected in an increase in welfare payments and the introduction of a minimum wage. An increase in spending on education is also among the priorities of the new government and infrastructure needs remain significant. The government nevertheless encourages the use of private financing for these projects in order to avoid an excessive deterioration in public finances, given its commitment to reduce the public debt (56% of GDP in 2015) to 50% by 2018. The objective remains ambitious, but the debt profile, predominantly concessional, sharply limits the risk of excessive debt.
The current account balance should also deteriorate in 2016. The increase in demand in the countries receiving Mauritian exports (two-thirds European) is likely to be muted, like the trend in tourist flows. Prices of food and energy products, which weigh heavily on the island’s imports, will probably not decline. Demand for consumer goods should be sustained by the increase in household consumption and the implementation of infrastructure projects will require imports of capital goods. The Mauritian economy should continue to attract significant FDI flows mainly from European countries (France), but also from South Africa and China. Moreover, the efforts to eliminate the double taxation and the protection of investors will continue to attract deposits from non-residents in the business centres, which provides an additional financing source.

 

Political stability is likely to continue after the return to power of the previous president Jugnauth on the island which is among the best-ranked countries in Africa in terms of governance

Mauritius is a well-established democracy. The general elections in December 2014 brought Sir Anerood Jugnauth (85 years) back to the post of prime minister. He held this function in the past (1982-1995 and 2000-2003) and was also president (2003-2012). He will have a comfortable parliamentary majority thanks to the resounding victory of the People’s Alliance (Lepep, 51 seats out of 69) that he represented. However, there are disagreements within this tri-party coalition, casting doubts on his ability to implement reforms. The population’s expectations are strong given the inequalities and a lack of progress in this area could cause discontent, nevertheless without calling into question the country’s political and social stability. 

Lastly, Maurice enjoys efficient governance and a favourable business climate. Its ranking according to the World Bank’s governance indicators is one of the best in Sub-Saharan Africa and Mauritius ranks first among African countries (32nd at a worldwide level) in the Doing Business ranking.

 

Last update: January 2016

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