Mauritius is an upper-middle-income country praised for its strong institutions and political stability.

It is the major investment hub for the rest of Africa, thanks to its strong business environment.

The banking sector is highly accessible while financing costs are low.

Financial services are Mauritius’ main source of export proceeds, followed by tourism and food, while many base and capital goods are imported.

As a result, the current account deficit (-4.

9% of GDP in 2023) is structural yet confined.

Mauritius’ economy was deeply affected by the Covid-19 pandemic due to the country’s deep global integration and dependency on tourism.

Ever since, tourist arrivals have seen a sustained and strong recovery.

The short-term political risk outlook is supported by rising general liquidity levels since last year.

Even though the foreign exchange reserves buffer is large at more than 8 months of import cover in April 2024, it remains well below the 14 months of imports it represented before the pandemic.

Ensuing global shocks, especially the impact on import costs stemming from the war in Ukraine, have complicated the post-pandemic recovery process and contributed to the depreciation of the Mauritian rupee and to higher inflation (expected at 5% in 2024).

However, compared to most other markets in the region, monetary and financial indicators were kept at acceptable levels despite the challenging global environment.

Real GDP growth is expected to reach almost 5% this year and 4% in 2025.

It is driven by a sustained recovery and FDI inflows exceeding pre-pandemic levels following the country’s removal from international grey-and blacklists for anti-money laundering and terrorist financing risks.

Mauritius is very vulnerable to climate change-related risks.

Due to its geographic location in the Indian Ocean’s tropical cyclone belt, Mauritius is extremely exposed to weather events like flash floods, cyclones and rising sea levels.

Moreover, the erosion of beaches and roads will negatively impact tourism revenues and require high public infrastructure investment spending.

Nevertheless, Mauritius is one of the better-equipped countries in terms of coping with and adjusting to climate change-related risks, even though the challenges will be enormous.

On the political front, the country is generally stable but there is an increased risk for unrest ahead of the November 2024 general elections.

Popular anger against the ruling MSM party over corruption and mismanagement of the disaster response to the cyclone in January 2024 is likely to dominate the election campaign and possibly determine the outcome.

In general, the short-term and medium-to-long-term political risks are low (in category 2/7 and 3/7 respectively) and the business environment is favourable (in category C/G).

The outlook for Mauritius is considered positive as the persistent economic recovery has translated into improved economic and financial indicators, despite the challenging global environment.