- The Mauritian economy rebounded strongly from the pandemic, while inflationary pressures eased in 2023, with annual inflation averaging 7.0 percent. The outlook for growth remains favorable, albeit risks are on the downside.
- A recalibration of the macroeconomic policy mix is now needed to help rebuild buffers that were eroded due to the pandemic, and to maintain financial stability.
- Priorities include growth-friendly fiscal consolidation to rebuild fiscal buffers while protecting the most vulnerable, strengthening monetary policy effectiveness, rebuilding external buffers, and continuing to closely monitor financial sector risks.
Washington, DC: An International Monetary Fund (IMF) mission led by Mariana Colacelli visited Mauritius from January 9 to January 18, 2024, to conduct the 2024 Article IV Consultation. Virtual mission discussions continued on the team's return to Washington D.C, up to February 21, 2024.
At the conclusion of the mission, Ms. Colacelli issued the following statement:
"The Mauritian economy has rebounded strongly from the impact of the pandemic, supported by the deployment of pre-pandemic fiscal and external buffers. Real GDP growth reached 8.9 percent in 2022 from rebounding tourism and manufacturing. Rapid growth was sustained in 2023—estimated at 6.9 percent—with output now having exceeded its pre-pandemic level. Vibrant tourism, social housing construction, and continued strong performance of transport and financial services buoyed growth.
"While still above the Bank of Mauritius' (BOM) target range of 2-5 percent, inflation fell during 2023, supported by lower international commodity prices. Average headline inflation declined from 10.8 percent in 2022 to 7.0 percent in 2023, and January 2024 inflation recorded 5.2 percent year-on-year. The external current account deficit is estimated to have narrowed significantly in 2023 while foreign exchange reserves stood at US$ 7.3 billion at end-2023.
"The outlook for growth remains favorable. In 2024, real GDP growth is projected at 4.9 percent, driven by construction as major social housing and public transportation projects are ramped up and the recovery of tourism to pre-pandemic levels. Headline inflation is projected to ease to 4.9 percent on average in 2024, mainly reflecting international oil and food price dynamics. A deterioration in global growth could depress tourism, while higher-than-anticipated fuel and food prices due to spillovers from Russia's invasion of Ukraine and the conflict in Gaza and Israel could exacerbate inflation, worsen the external position, and weaken the recovery. Extreme climate events could weaken tourism and damage local infrastructure, thus weakening growth.
"Policy discussions centered on recalibrating the macroeconomic policy mix to rebuild macroeconomic buffers that were eroded due to the pandemic and to maintain financial stability. While the fiscal stance in fiscal year 2023-24 is expected to be expansionary—with the primary fiscal deficit projected to widen to 2.9 percent of GDP, excluding grants—implementing the authorities' medium-term growth-friendly fiscal consolidation plan is important to reduce public debt and rebuild fiscal buffers, including by mobilizing additional tax revenue and reducing current spending, while protecting the most vulnerable.
"The monetary policy stance has become less accommodative in recent months with the decline in inflation, while inflation remains above BOM's target range. BOM should stand ready to tighten its stance should inflationary pressures reemerge, while strengthening the effectiveness of the new monetary policy framework including by further enhancing its communication strategy. Rebuilding macroeconomic buffers, including foreign reserves, would help enhance the resilience of the economy in the face of shocks. Strengthening the resilience of the financial sector and managing macro-financial risks will support financial stability. Close monitoring of financial sector risks should continue, including with the global business companies operating in the Mauritius International Financial Center.
"Advancing structural reforms, including by sustaining compliance with Anti Money Laundering/Combating the Financing of Terrorism (AML/CFT) standards, improving governance, reducing skill mismatches in the labor market, and fostering digitalization and climate-resilient infrastructure investment is key to supporting private sector investment and promoting economic diversification.
"The mission extends its thanks to the Mauritian authorities and Mauritian people for the constructive dialogue and warm hospitality."
