IMF Executive Board Concludes 2022 Article IV Consultation with Mauritius

The Executive Board of the International Monetary Fund (IMF) has concluded the Article IV consultation with Mauritius on a lapse-of-time basis.

Mauritius has been gradually recovering from the pandemic.

The authorities have successfully managed the health impact of the pandemic and vaccinated most of the population.

Real GDP expanded by 4% in 2021 as many sectors recovered to pre-pandemic levels of economic activity while the tourism sector remained subdued.

Against this backdrop, the current account deficit widened substantially. Fiscal performance is expected to improve in 2021/22 helped by quasi-fiscal operations although the pandemic and new pressures on current spending burden the fiscal balance.

Inflation increased substantially from 2.7% at end-2020 to 6.8% at end-2021 and further to 11% at end-April 2022.

The financial sector, including the Global Business Companies (GBCs) segment was stable in 2021. Mauritius exited from the Financial Action Task Force (FATF) list of jurisdictions under increased monitoring in October 2021 and the analogous EU and UK lists soon after.

The IMF Staff projects real GDP growth of 6.1% in 2022. The economic rebound is expected to be driven primarily by the tourism sector with tourist arrivals expected at 60% of pre-pandemic levels.

Unemployment is expected to decline as the economy recovers and to return to trend in the medium-term.

Annual inflation is expected to rise to 11.4% in 2022 due to surging commodity prices, past depreciation of the rupee, and recovering domestic demand.

The economy is expected to converge to its pre-pandemic trend growth of 3-3½ in the medium term.

The outlook for Mauritius, the IMF said, is subject to downside risks, including due to the war in Ukraine.

Rising global inflation reduces real disposable income and may weigh on global demand, including for tourism, and freight costs.