Business
4% Growth Forecast: Mauritius’ Economic Resilience Amidst Challenges
In a significant affirmation of confidence, S&P Global has maintained its sovereign credit ratings for Mauritius, assigning long-term and short-term ratings in both local currency and foreign currency at BBB-/A-3, with stable outlooks. The agency anticipates an average growth rate of 4% for the island nation during the period from 2025 to 2028, despite the turbulent global economic climate.
The analysts at S&P Global express a cautious optimism regarding Mauritius’ economic resilience.
They predict a slowdown in real GDP growth, yet maintain that the average will remain robust at 4% over the next five years.
Notably, the trend in real GDP per capita growth in Mauritius surpasses that of other sovereign states within the same economic category.
The island’s economic performance is expected to benefit from a resurgence in tourism, the expansion of global commercial sectors, and ongoing public and private investment projects.
However, the long-term growth potential of Mauritius, particularly within the tourism sector, hinges significantly on its ability to mitigate and adapt to climate change, as highlighted by S&P Global’s analysts.
Potential Scenarios for Mauritius’ Economic Future
The report outlined two potential scenarios for Mauritius’ credit rating over the next 24 months:
- Adverse Scenario: A downgrade could occur if real GDP per capita growth falls significantly short of expectations.
- Such a downturn may arise from hindered fiscal consolidation or external headwinds that necessitate substantially increased external financing.
- Upward Scenario: Conversely, an upgrade in Mauritius’ rating would require a markedly faster pace of fiscal consolidation than currently anticipated.
- Additionally, government interest expenditures must fall below public revenue, accompanied by strong growth in real GDP per capita.
Political Landscape Post-Elections
Following last year’s elections, S&P Global analysts do not foresee any major shifts in policy formulation.
Significant challenges faced in the previous years, including rising living costs, increasing corruption cases within the public sector, and a scandal involving wiretaps during the campaign.
The newly elected government has unveiled a plan for 2025-2029, focusing on youth unemployment, fiscal consolidation, and economic diversification, while maintaining a pro-business stance.
However, ongoing investigations into the former regime may exacerbate political tensions.
In February, the former Prime Minister was arrested in connection with an alleged fraud case, while both the former Minister of Finance and the former Governor of the Central Bank were issued arrest warrants on 9 April.
Analysts expect this high-profile case to attract considerable media attention.
Furthermore, the previous administration is under scrutiny for the rapid increase in public debt, which has surged by 43% over five years, alongside accusations of inflating GDP growth figures.
Key Insights from the Report
- Mauritius’ high public sector debt is projected to decline gradually as a proportion of GDP.
- The current account deficit is expected to shrink progressively, bolstered by substantial tourism revenues, moderated global food and hydrocarbon prices, and significant inflows from the World Bank.
- However, uncertainties surrounding customs tariffs pose considerable risks of deterioration.
Inflation Outlook
Forecasts indicate a decline in inflation rates until 2028, with a gradual deceleration of overall inflation to 3% by 2027, down from 7.1% in 2023 and 10.8% in 2022.
Influencing Factors
The Bank of Mauritius (BoM) has implemented a framework in January 2023 aimed at enhancing monetary policy operations and transmission mechanisms.
Nevertheless, excess liquidity within the national banking system has hindered the effective implementation of these policies.
While S&P Global’s affirmation of Mauritius’ credit rating reflects a degree of confidence in the island’s economic prospects, the path ahead is fraught with challenges that demand vigilant navigation through both domestic and international uncertainties.
Source: Defi Media
