The Mauritian economy is experiencing a slowdown, with the product interior brut (PIB) expected to grow by only 3% in 2026, down from 3.5% in 2025. This slowdown coincides with a significant increase in oil prices, with petrol and diesel prices rising by around 33% since March. The latest price revision, effective September 29, has pushed petrol to Rs 77.70 per liter and diesel to Rs 78.35 per liter.
The impact of rising oil prices extends beyond just motorists, as it affects various sectors such as transportation, fishing, agriculture, construction, and distribution. This, in turn, leads to increased costs for goods and services, ultimately affecting consumers. With Mauritius being a small island economy that imports most of its oil, it has limited options to mitigate the effects of global price fluctuations. The government is relying on the Price Stabilization Account to cushion the impact, but its deficit has already reached Rs 3.63 billion as of September 28.
The current global context adds to the complexity of the situation, with the Middle East remaining unstable and strategic shipping routes being disrupted. The oil market now factors in a geopolitical risk premium, further exacerbating the situation. The Strait of Hormuz, a critical waterway for oil transit, highlights the fragility of the energy system that Mauritius and other import-dependent economies rely on.
Statistics Mauritius forecasts a contraction in total investment in volume terms in 2026, following a modest 2025. Private investment is also expected to decline. This means the economy must absorb a higher energy bill at a time when one of its key drivers, investment, is not operating at full capacity. Additionally, the government faces budgetary constraints, with the need to absorb significant additional commitments, including Rs 10.6 billion related to the Chagos issue and Rs 6.2 billion for the universal pension scheme.
The revised GDP figures should be interpreted with caution, as Statistics Mauritius has significantly revised the national accounts to include new data and merchanting activities of Global Business Companies. While the nominal level of the economy appears higher, this does not necessarily translate to greater wealth for households. The actual indicator of economic well-being may be the remaining disposable income for households after accounting for essentials like fuel, electricity, food, housing, and debt repayment.
The oil price shock is not a one-time event but rather a cumulative process that affects the economy gradually. It starts with higher fuel prices, then transportation costs, followed by increased merchandise prices, and ultimately impacts household budgets. As businesses see their margins squeezed and the government faces rising support costs, there is a risk that the economy may experience a series of small but significant setbacks.
To mitigate these effects, the government may need to consider targeted measures to support vulnerable households and businesses. However, any interventions must be carefully calibrated to avoid exacerbating the situation or creating unsustainable fiscal commitments. The challenge for policymakers is to balance the need to cushion the impact of higher oil prices with the imperative of maintaining economic stability and sustainability.
Key points
- Mauritius' economy is expected to grow by only 3% in 2026 due to rising oil prices.
- The Price Stabilization Account has a deficit of Rs 3.63 billion as of September 28.
- The government faces significant budgetary commitments, including Rs 10.6 billion for the Chagos issue and Rs 6.2 billion for the universal pension scheme.
