Mauritius’ exports have continued recovering from the shock caused by the COVID-19 pandemic. The country’s total merchandise exports continued recovering to USD 2.0 billion in 2021. Mauritius has a diversified export profile and earnings from fish have continued decreasing to USD 225.2 million (approx. 11.5% of total exports) in 2021. Other top exports from Mauritius include sugar and clothing and textiles. These exports contributed USD 308.3 million (approx. 15.7% of total exports). Mauritius’ export earnings from sugar have continued decreasing to USD 168.6 million in 2021; and earnings from clothing and textiles have begun recovering despite being below the historical medium-term average at USD 139.7 million in the same period. Mauritius’ trade deficit continued widening beyond the historical medium-term average of -USD 2.4 billion for 2018 to 2020, to -USD 3.4 billion in 2021.
Total merchandise export earnings have begun recovering which ameliorated the relieved pressure caused by net FDI inflows (foreign capital being invested domestically). Mauritius’ FDI inflows began recovering despite being below the historical medium-term average at USD 253.2 million in 2021. Hence, Mauritius’s FDI stock has not recovered from COVID-19 and continued decreasing from an annual average of USD 5.6 billion for 2018 to 2020, to USD 5.3 billion in 2021. This does not bode well for Mauritius as a country that is aiming to attract more foreign investment to balance its international payments and further develop its economy away from the reliance on fish and agricultural exports.
Remittances receipts have been volatile the period. Personal remittances received have not recovered from COVID-19 and continued decreasing from an annual average of USD 282.6 million for 2018 to 2020, to USD 272.5 million in 2021. Personal remittance payments to foreign nationals have begun moderating since the COVID-19 pandemic from an annual average of USD 890.8 million for 2018 to 2020, to USD 719.6 million in 2021. Mauritius has had net remittance outflows (net remittance payment to foreign nationals) which decreased to USD 447.1 million in 2021. This has affected the current account balance and strength of the MUR over the period.
The MUR has continued depreciating. In nominal terms, the MUR depreciated by an annual average of -4.5% against the USD for 2018 to 2020. The MUR depreciated by -17.3% to an annual average of MUR 41.7 per USD in 2021. Mauritius’ current account deficit continued widening beyond the historical medium-term average. In 2022, Mauritius’s current account deficit narrowed despite being wider than the historical medium-term average. Mauritius seems to have benefited from the improved climatic condition which have improved its agricultural output and exports. However, Mauritius has been affected by the higher fuel and food prices which continued appreciating due to lower global supply following the sanctions against Russian exports after its military exercises in Ukraine. This is also reflected in the projections for Mauritius’ current account balance.
In 2023, Mauritius’s current account deficit is projected to narrow below the historical medium-term average to -USD 1.0 billion (approx. -8.1% of GDP). In the medium-term from 2024 to 2026, Mauritius’ current account deficit is project to narrow to an annual average of -USD 750.7 million (approx. -5.2% of GDP). This illustrates a sustained improvement in the current account balance despite the currently high fuel and food prices which are primarily driven by the impact of sanctions against Russia and the conflict with Ukraine. However, this could change in the medium-term due to the expected impact of geopolitical tensions on foreign capital flows. Therefore, Mauritian authorities are still faced with uncertainty ahead unless they can take advantage of opportunities in sugar and oil seeds to offset the cost of high fuel and food imports. The global price of sugar appreciated by 4.6% to USD 0.187 per pound in 2022 (2021: +38.6%; USD 0.179 per lb).
The issue of diversifying the Mauritian economy remains an elusive obstacle for the country. Mauritius still has a significant potential to grow its exports from sugar and clothing and textiles. These represent the highest growth potential towards diversifying the Mauritius’s economy and export earnings. Apart from this, Mauritius should also deepen its integration in the SADC region and increase its intra-regional trade. The Mauritian authorities also need to negotiate preferential market access in frontier markets to encourage further productivity gains for its clothing and textiles sector. Moreover, Mauritius needs to ensure that it can use its competitive advantage through market access to develop competitiveness through productivity gains.