Running the next development lap in Mauritius: Issues, outlooks and policy priorities

Mauritius has witnessed a period of significant transformation and has achieved substantial economic and human development five decades after gaining its independence in 1968. It has diversified its economy, raised per capita income 25-fold and has graduated to becoming an upper-middle-income country. It has now reached a critical crossroad as many policies that had propelled it to success have started to lose their relevance while the international environment is changing fast. The island is finding it hard to achieve a high growth momentum and this has adverse implications for job creation and the quality of life of its people. A new economic paradigm is necessary to enable the country to run the next development lap. Mauritius must articulate a bold development strategy both to move out of the middle-income trap and to lay the foundations for future growth and shared prosperity in the light of domestic challenges and global constraints. It needs to reignite the engines of the old economy to make it more dynamic and competitive; it should bolster growth in the emerging sectors; and it must identify new pillars of growth that will pursue the diversification and transformation of the economy. This chapter considers the policy agenda to attain these objectives. Mauritius reached a critical crossroad in its development agenda at the onset of the twenty-first century as many policies that had propelled it to success started to lose their steam and relevance and the international environment was changing fast. With the exception of tourism which is performing well, the macroeconomic landscape mirrors the challenges at sectoral levels. Manufacturing is underperforming and its contribution to output, jobs, investment and exports is shrinking. A new economic paradigm is necessary to enable Mauritius to run the next development lap. The island nation must articulate a new development strategy in order to move out of the middle-income trap and to lay the foundations for future growth and shared prosperity in the light of domestic challenges and global constraints. Mauritius has recorded a surplus in its trade in services to compensate for the high deficit in the balance of trade in goods.