Mauritius’s economy has begun recovering from the shock caused by the COVID-19 pandemic. Real GDP growth is projected to improve from an annual average of -2.7% for 2019 to 2021, to 6.1% in 2022. Inflation is projected to increase from an annual average of 2.3% for 2019 to 2021, to 8.4% in 2022. The elevated inflation is caused by the sanctions against Russia which have increased the price of crucial imports. In the medium-term period from 2023 to 2025, real GDP growth is projected to decrease to an annual average of 4.3%. Meanwhile, inflation is projected to decrease to an average of 4.9% over the medium-term from 2023 to 2025.
The Government of Mauritius’s debt has begun moderating after increasing since 2020. Mauritius’s gross public debt is projected to increase from an annual average of 94.8% of GDP for 2019 to 2021, to 98.9% of GDP in 2022. The increase in public debt is largely due to the Government of Mauritius implementing procyclical fiscal expansion to support the economic recovery from the shock caused by the global lockdown response to the COVID-19 pandemic. The fiscal deficit is projected to narrow from an annual average of -8.8% of GDP for 2019 to 2021, to -4.9% in 2022. This shows the procyclical fiscal stance taken by the government as spending and further borrowing outpace revenue growth. In the medium-term period from 2023 to 2025, the fiscal deficit is projected to narrow to an annual average of -4.0% of GDP. Therefore, public debt is projected to decrease to an average of 94.7% of GDP over the medium-term from 2023 to 2025.
Mauritius’s external sector was severely affected by the COVID-19 pandemic in 2020 and the sector’s brief recovery in 2021 has been disrupted by the sanctions against Russia, which has raised the price of imports. Mauritius’s current account deficit is projected to widen from an annual average of -USD 1.1 billion (approx. -9.7% of GDP) for 2019 to 2021, to -USD 1.6 billion (approx. -14.0% of GDP) in 2022. In the medium-term period from 2023 to 2025, the current account deficit is projected to narrow to an annual average of -USD 782.7 million (approx. -5.8% of GDP). This illustrates a short-lived deterioration of the current account balance due to the impact of sanctions against Russia on import prices. However, Mauritian authorities will have to take a proactive approach to macroeconomic management given the uncertainty of how long the conflict and sanctions will last. The impact of the Russia-Ukraine conflict on capital markets, specifically the withdrawal of capital from emerging markets, will also become a major concern for the balance of payment and the MUR exchange rate given that Mauritius is a regional financial hub.
Mauritius is scheduled to hold its national elections in 2024 and the election campaigning cycle is still a long way ahead. Incumbent President H.E. Paramasivum Pillay “Barlen” Vyapoory may be vying for a second term in his predominantly ceremonial role as head of state. The current political climate remains relatively calm despite pressures caused by the slow economic recovery. The slow rise in tourism and the impact of the Russia-Ukraine conflict have affected economic activity, raised the cost of crucial imports and led to depreciation of the MUR. President H.E. Paramasivum Pillay “Barlen” Vyapoory will have to rely on his cabinet and central bank authorities to play a proactive role in macroeconomic management given these uncertainties. Nevertheless, Mauritius will continue relying on its economic diplomacy and strong bilateral cooperation to ease the economic pressures while also playing a crucial role in regional cooperation as the host of the Indian Ocean Rim Association Secretariat.