Operating Environment Overview | Mauritian Banking Institutions (Aug 2022)


The Mauritian economy is on a recovery path, after a sharp contraction in 2020 precipitated by the COVID-19 pandemic. With tourism halted, real GDP contracted by 15% in 2020 (real GDP growth was 3% in 2019), and the current account deficit widened substantially according to the International Monetary Fund (“IMF”). The worst hit sectors were tourism (including accommodation and food services) and manufacturing sectors since activity declined sharply with the closure of borders and disruptions in the global supply chains. Other sectors were also impacted due to the knock-on effects, albeit with varying magnitudes. Real GDP growth rebounded strongly to 5% in 2021 and is forecast to rise to 6.1% in 2022, fueled by the construction sector and public investment, gradual recovery in the tourism industry, and as exports strengthen in line with global demand. In the medium-term, real GDP growth is expected to firm to the pre-pandemic trend growth of 3-3.5%. Annual inflation increased substantially from 2.7% at end-2020 to 6.8% at end-2021 and further to 11% at end-April 2022 and is expected to rise to 11.4% later in 2022 due to surging commodity prices, past depreciation of the rupee, and recovering domestic demand. Unemployment, while higher at 9.5% in 2021 (2020: 9.2%, 2019: 6.7%) was contained by wage support schemes and is expected to decline as the economy recovers and to return to trend (around 7%) in the medium-term. Downside risks to the outlook include the impact of the Russia-Ukraine war that has amplified the increase in fuel and food prices and global supply bottlenecks, a resurgence of the pandemic, uncertainty surrounding tourist arrivals and tightening of global financial conditions. Mauritius successfully exited the FATF list of jurisdictions under increased monitoring in October 2021. As from November 2021, the United Kingdom also removed Mauritius from its list of high-risk countries under its UK Money Laundering and Terrorist Financing Regulations 2021. Mauritius was also removed from the European Union List of high-risk countries shortly after. The delistings are important milestones for the Mauritius International Financial Centre and is credit positive for banks.

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