Our Opinion

The Mauritius economy is performing well and is forecast to grow at 7%, with a budget deficit and a public debt on a downward trend at 3.4% and 71.1% respectively, in 2024/25. The different sectors of the economy have shown good momentum, and there is a high degree of optimism as confirmed by our recent PwC CEO survey, where 83% of local CEOs expressed confidence in the country’s economic prospects. Private sector investments (Rs131bn) are outpacing public sector investments (Rs46bn) and the economy’s Gross Fixed Capital Formation (‘GFCF’) recorded a high of Rs177bn.

The Government continues to use the remaining balance of Rs13bn in special funds to finance its projects. Whilst these figures reflect strong fundamentals, public spending is higher than anticipated, and the budget deficit and public debt are worse than planned. Furthermore, construction remains the key growth driver, and 55% of GFCF are still in less productive assets (Figure 1).

The Budget theme, "Tomorrow is Ours," underscores a philosophy fostering resilience, inclusive growth, and sustainable development. Whilst the economic conditions remain challenging due to factors such as inflation and global slowdown, these are primarily cyclical shocks, and the country seems to be coping with them in the short-term. However, climate change and an ageing population are permanent threats to the country and will limit long-term economic prospects. The Budget seeks to address the impact of climate change through measures such as the introduction of an agri-voltaic scheme, subsidies to promote solar energy, and initiatives to restore coastlines, promote sustainable villages, and implementation of a national coral reef restoration programme. Additionally, a new corporate climate responsibility levy of 2% of company’s profits has been introduced to fund these initiatives and is expected to generate Rs5bn. Whilst these measures confirm the Government’s commitment to combating climate change, their success will depend on effective policy enforcement and public-private collaboration.

Mauritius’ population has declined by 1,142 in 2023 due to emigration, deaths and low birth rate. With unemployment at its lowest and an ageing population, the country is experiencing a labour supply shortfall at all levels, currently estimated at 50,000. The impact of demographic changes is estimated to reduce our GDP growth by over 0.50% annually. The Budget attempts to make the labour market more vibrant with the extension of the ‘Prime à l’Emploi’ scheme, opening up the borders to foreign talents by reducing thresholds for occupation permits for professionals to Rs22,500 and the removal of quotas and fast-tracking the delivery and renewal of work permits for the agriculture, manufacturing and ICT sectors. These measures will provide a welcome boost.

The Government targets FDI inflows of Rs40bn and introduces measures to streamline and grant permits within 10 days, open 24/7 operational information centres, and expand the national e-licensing system. 

Despite some promising initiatives, the real problem lies in ensuring that the announced measures are effectively implemented. There is also an absence of measures to promote the development of new industries for long-term economic stability and growth.

Despite these achievements, the Budget includes even more social giveaways targeted at different segments of the population. While these may be affordable in the short-term, the growing burden on the welfare state is a great concern. Over the next 10 years, nearly 170,000 inhabitants are expected to reach retirement age, accounting for over 30% of the population.

For instance, today’s gain to pensioners who will receive Rs15,000 monthly, translates into tomorrow’s pain on the labour force, totalling nearly Rs86bn annually. With a shrinking labour force, each worker will assume a greater liability; the clock is ticking (Figure 2). 

The country is surfing on the wave of dynamism, and economic buoyancy, allowing the Government to sustain its socialist approach in the short-term. Our economic indicators are rather healthy, as our GDP has recovered and exceeded pre-pandemic levels. While we have made progress towards greater equality and social inclusion, the social burden on future generations remains a big worry. The policy mix should be recalibrated to focus less on gifting what we have now and more on promoting economic diversification and rebuilding the country’s reserves for the future.