Mauritius’ upper-middle income economy has continued to grow at a moderate rate; inflation is low; and the external position has improved. Macroeconomic conditions remain stable but the authorities face macro-financial challenges stemming from the recent collapse of a large financial conglomerate, which affected the real economy, as well as risk exposures and potential spillovers from the massive offshore sector and its sizeable inter-linkages with domestic banking activities. These challenges, discussed in the FSAP and in the consultation as a macro-financial pilot, require a significant strengthening of the macro-prudential and financial stability policy frameworks. The authorities are also resolute to avoid the middle-income trap, but face a tight tradeoff, anchored by a statutory medium-term debt target, between spending on social entitlements versus infrastructure upgrading, much needed as competiveness and productivity have been eroding and investment rates declining. Given the low female labor force participation in a shrinking labor force, the consultation with Mauritius is also a pilot for the analysis of gender inequality.
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