Mauritius

Moderate growth on the horizon after post-Covid normalisation

Economic growth is expected to slow in 2025 as the tourism sector returns to normal after its strong post-pandemic recovery between 2022 and 2024. Construction, which is largely related to tourism, could be affected; values are set to stabilise but volumes are expected to fall by around 4%. In 2026, growth is expected to accelerate slightly and will be mainly driven by services (77% of GDP in 2024). Tourist arrivals are expected to remain strong, supporting trade, accommodation and catering, and thus contribute to domestic demand and service exports. Investment in financial services and information and communication technologies should also reinforce this momentum. The textile sector (17% of exports in 2024) is expected to stagnate again, penalised by increased competition from Asian economies, rising production costs and US tariffs (15%). The sugar cane industry (13% of exports) will continue to be affected by the lingering effects of drought. However, sustained European demand and domestic investment should enable moderate growth in exports of fish and seafood (21% of exports). In 2026, infrastructure development (roads, ports, housing) will be stimulated by public investment planned under the 2025-2026 Public Sector Investment Program (PSIP), which will give fresh impetus to the construction sector.

Private consumption (accounting for 68% of GDP in 2024) will be boosted by falling unemployment (6% in 2024 and below pre-pandemic levels) and controlled inflation. The latter should remain within the central bank's target range of 2% to 5% on back of moderating commodity prices. However, given the current prevailing global and domestic economic uncertainty, the central bank could keep its key interest rate unchanged after raising it to 4.5% in February 2025 to tackle pressures related to rising service costs and wages.

Continued fiscal consolidation

After an expansionary 2024-2025 budget marked by tax incentives and massive aid, the deficit reached nearly 10% of GDP, a record since the Covid years. The 2025-2026 budget marks a shift towards austerity: rationalisation of VAT exemptions, increased excise taxes on harmful products and vehicles and higher contributions from high-income households and businesses. Payments on the 99-year lease on Diego Garcia (Chagos Archipelago) made by the UK will boost public revenues. The government also plans to gradually raise the retirement age from 60 to 65—pensions account for 26% of current spending—while streamlining social benefits. These reforms will remain highly unpopular. The presence of a new government following the 2024 elections contribute to better control over spending. Fiscal consolidation will reduce the public deficit, which is mainly financed by domestic borrowing. Public debt (less than a quarter of which is external) will remain above the self-imposed statutory ceiling of 80% of GDP.

The current account will still show a structural deficit in 2026 due to a large trade deficit (26% of GDP in 2024) due to Mauritius’ heavy dependence on external supplies (oil, vehicles, cereals, etc.), which is exacerbated by the country's insularity. However, lower commodity prices should ease the import bill and exports of goods should grow modestly. The structural surplus in services, meanwhile, is expected to narrow as tourism normalises and imports of services for infrastructure projects increase. FDI flows – more than two-thirds of which are directed toward real estate, much of it linked to tourism – will continue to support foreign exchange reserves, which were comfortable at the end of October 2025: USD 9.5 billion (+12% year-on-year), equivalent to 13 months of import coverage.

Democratic changeover

In office since 2017, the former Prime Minister, Pravind Jugnauth and his allies suffered a resounding defeat in the October 2024 general elections at the end of a campaign marred by a large-scale phone-tapping scandal. Acknowledging his defeat, Jugnauth handed over his seat to Navin Ramgoolam, a position the latter had already held twice before. Ramgoolam’s Alliance of Change won 60 out of 70 seats in Parliament. The changeover and the peaceful transition once again demonstrated the country's democratic health.

Internationally, Mauritius will continue to maintain close ties with its main trading partners, notably France, India and South Africa. In May 2025, Mauritius signed a treaty with the UK to hand back sovereignty over the Chagos Islands, an isolated archipelago in the northern Indian Ocean, thereby ending a decades-long territorial dispute. The treaty is scheduled to enter into effect in early 2026. While officially recognising Mauritian sovereignty over the archipelago, the agreement grants the UK access to the main atoll of Diego Garcia—home to a joint military base with the US—for an initial period of 99 years, in exchange for an estimated total rent of USD 4.7 billion. The treaty also provides for the UK to pay an annual subsidy of GBP 45 million for 25 years to finance development projects involving British companies.

Last updated:November 2025