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OECD ECONOMIC OUTLOOK, VOLUME 2024

ISSUE 2

December 2024

PUBE
OECD ECONOMIC OUTLOOK, VOLUME 2024 ISSUE 2 © OECD 2024
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Mauritius
Real GDP is projected to grow by 6.1% in 2024, 5% in 2025 and 4% in 2026. Investment is the main driver
of growth, driven by large construction projects in tourism, housing and public infrastructure. Household
consumption is expected to remain supported by employment, wage increases and stronger government
support for low-income workers. Headline inflation, at 3.4% in October, continues its decline and is now
within the target band of the central bank. Risks to inflation are on the upside as the economy has been
growing above potential for some time.

Fiscal policy remains expansionary as the primary fiscal deficit is decreasing only slightly, despite strong
growth. A mix of measures to increase spending efficiency and additional revenue mobilisation is needed to
reduce public debt and create fiscal space for future expenditure pressures from population ageing and
climate change. Maintaining policy rates at their current level would help curb pressures on inflation as
economic growth is above potential and labour shortages are widespread. Simplifying immigration
procedures would help to ease widespread skills shortages.

Robust growth momentum is driven by investment and tourism

Mauritius’s economy continues to grow strongly, supported by strong momentum in tourism and
investment. Tourist arrivals in 2024 are on track to surpass the record set in 2018, with spending per tourist
also rising. Tourism revenues are expected to reach 13.5% of GDP by the end of the year. Private
investment reached 21% of GDP in the second quarter of 2024. Most of this investment is concentrated in
construction, with strong activity in both residential and non-residential buildings. However, labour
shortages are increasingly limiting the growth of key sectors, particularly tourism, construction and ICT.
Manufacturing growth remains weak, reflecting the ongoing decline of production in the textiles sector.

Mauritius

Source: Bank of Mauritius; and Mauritius Statistics.

StatLink 2 https://stat.link/qmb2ua

OECD ECONOMIC OUTLOOK, VOLUME 2024 ISSUE 2 © OECD 2024

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Mauritius: Demand, output and prices

2021 2022 2023 2024 2025 2026

Current prices Percentage changes, volume

Mauritius MUR billion (2018 prices)

GDP at market prices 478.8 8.9 7.0 6.1 5.0 4.0

Private consumption 350.0 3.3 2.6 1.8 2.9 2.5
Government consumption 82.5 6.4 -3.0 6.7 3.2 1.9
Gross fixed capital formation 93.8 7.8 30.7 22.0 13.5 7.6
Exports of goods and services 211.6 36.8 0.6 6.6 7.2 5.8
Imports of goods and services 257.6 10.4 3.9 15.3 9.0 5.8
Memorandum items
Unemployment rate (% of labour force) _ 7.8 6.4 6.0 5.7 5.8
Consumer price index _ 10.8 7.0 3.5 3.2 3.7
Current account balance (% of GDP) _ -11.4 -4.5 -4.1 -4.4 -4.4
Source: OECD Economic Outlook 116 database.
StatLink 2 https://stat.link/ncoshu

The fall in global energy prices is contributing favourably to Mauritius’s economic outlook by lowering
inflation and indirectly supporting the tourism boom. Goods exports saw a sharp nominal decline over the
year to the first quarter of 2024 (-11.5%), followed by a strong rebound in the second quarter (+12.5%),
though this reflects a low baseline from the previous year. Overall, in the first half of 2024, exports of goods
grew at a 2% rate. As a share of GDP, goods exports continue to shrink, now representing only 15% of
GDP compared to 25% a decade ago.

Fiscal and monetary policies will remain supportive

The current expansionary fiscal stance is expected to shift towards neutrality during 2025-2026, with a
gradual reduction in the primary fiscal deficit. The reduction in the deficit is likely to be facilitated by
sustained high growth. As inflation receded, the Bank of Mauritius reduced interest rates from 4.5% to 4%
in September 2024. However, strong GDP growth, full employment, and an ongoing investment boom are
likely to push inflation up again. Therefore, maintaining policy rates on hold until late 2025 would dampen
inflationary pressures. As inflation recedes in 2026, the central bank would start reducing rates again.

A steady expansion with gradual convergence to long-term potential is expected

Real GDP growth is expected to moderate, from 6.1% in 2024 to 5% in 2025 and 4% in 2026. Growth will
be driven primarily by robust investment in infrastructure and housing, alongside continued strength in the
tourism sector, which is expected to surpass pre-pandemic levels in visitor numbers and spending.
Household consumption will remain robust, supported by real wage gains, lower inflation, and an
expansion of social benefits for low-income households. Inflation is expected to rise slightly from 3.2% at
the end of 2024 due to continued pressures from tight labour markets and vigorous investment. The
gradual fiscal consolidation will help reduce risks of overheating. Risks to the outlook include potential
delays in fiscal consolidation, which could undermine debt stability and increase inflationary pressures in
an already heated economy. Rising global commodity and energy prices could worsen the terms of trade,
slow the expected decline in inflation, and weigh on household consumption. The offshore banking sector’s
reliance on short-term deposits exposes it to funding volatility, with potential impacts on the financial
system in the event of sudden withdrawals, notwithstanding high liquidity buffers and prudential measures.
On the upside, stronger-than-expected growth in tourism or more vigorous trade with key African partners
could provide additional support to activity.

OECD ECONOMIC OUTLOOK, VOLUME 2024 ISSUE 2 © OECD 2024

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Addressing labour shortages would support fiscal commitments and growth

Addressing fiscal and labour market challenges is crucial to sustain growth. Fiscal consolidation is needed
to reduce public debt and rebuild fiscal space as an aging population will increase pressure on pension
and healthcare spending. Regular evaluations of grants and subsidies to the private sector could help to
scale back underperforming programmes and improve spending efficiency. At the same time, a shrinking
workforce is limiting growth, further stressing the need for structural reforms to expand labour supply.
Delaying the eligibility age for basic retirement pension from the current 60 years could encourage older
workers to remain active for longer. Expanding affordable childcare to raise female participation, and
streamlining immigration procedures would help to boost labour supply. Building fiscal space is also crucial
to ensure resilience in the event of a major climate event.

OECD ECONOMIC OUTLOOK, VOLUME 2024 ISSUE 2 © OECD 2024