## sipea2026081 - 2070. Relative to a counterfactual of unchanged demographics, GDP would be nearly 50 percent lower by

## Source details

**Canonical URL:** [sipea2026081 - 2070. Relative to a counterfactual of unchanged demographics, GDP would be nearly 50 percent lower by](https://www.imf.org/-/media/files/publications/selected-issues-papers/2026/english/sipea2026081.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/selected-issues-papers/2026/english/sipea2026081.pdf.md)
- [Structured JSON version](/-/media/files/publications/selected-issues-papers/2026/english/sipea2026081.pdf.json)

---

### A. Demographic Trends and Macroeconomic Context
- Mauritius is experiencing one of the fastest population ageing processes among its peers.
- Old-age dependency ratio (population aged 65+ relative to those aged 15-64) is projected to rise sharply.
- Fertility stood at 1.4 births per woman in 2024, well below the replacement rate.
- Out-migration, particularly among skilled workers, compounds pressures; total population fell to about 1.24 million at end-2024.
- Long-run projections: total population is projected to decline nearly 30 percent by 2070.
- First-order macroeconomic implications:
  - Smaller labor force reduces growth potential unless offset by higher participation, productivity gains, or migration.
  - Ageing increases pressure on public finances through pensions, healthcare, and age-related spending.
  - Combination of negative population growth, declining working-age share, and rising elderly population will exert a sizeable drag on economic growth and intensify fiscal pressures.

### B. Analytical Framework and Methodology
- Growth decomposition framework: GDP = N × (WA/N) × (L/WA) × (Y/L), where:
  - N = total population,
  - WA/N = working-age population share,
  - L/WA = labor force participation rate of working-age population,
  - Y/L = output per worker (productivity).
- Two simplifying assumptions:
  - Labor productivity per worker (Y/L) is held constant over time.
  - Age-specific labor force participation rates remain fixed across time.
- Under these assumptions, demographic contributions to GDP growth decompose into:
  - a. Population size effect (N);
  - b. Retirement effect (WA/N);
  - c. Composition effect within working-age population (L/WA).
- Data sources:
  - United Nations World Population Prospects (median fertility scenario, 5-year age bands) for population projections.
  - International Labor Organization estimates based on Mauritius’ 2023 Continuous Multipurpose Household Survey for labor force participation rates (5-year age bands, disaggregated by gender).

### C. Baseline Results: the Demographic Drag on Growth
- Historical shift: until mid-2010s, rising working-age population supported growth; around 2017 demographic contribution turned negative.
- Projected drag:
  - Demographic pressures could reduce annual GDP growth by about 2 percentage points per year by 2070.
  - Approximately half of this drag reflects declining population size.
  - The remainder stems from ageing via falling working-age share and less favorable age composition.
- Cumulative level effects by 2070:
  - GDP in 2070 would be nearly 50 percent lower relative to a counterfactual of no demographic change.
    - Roughly half of this fall is due to population size effects; the other half due to ageing.
  - GDP per capita could be about 28 percent lower between 2025 and 2070 if productivity gains do not compensate.
    - Shrinking working-age share accounts for almost 27 percentage points of the per capita reduction.
    - Changes in participation within working-age cohorts contribute less than 2 percentage points.

### D. Scenario Analysis: Labor Supply Policies to Mitigate Demographic Headwinds
- Approach: partial-equilibrium scenarios adjust age-specific participation rates beginning in 2026; simulations abstract from productivity gains, capital deepening, labor demand effects, transition dynamics, and migration policy.

- Scenario 1: Increasing Participation Among Older Workers (ages 50-64)
  - Assumption: participation rates for ages 50–64 rise to the contemporaneous participation rate of the 45–49 cohort (79%); other age-specific rates unchanged.
  - Outcome: simulated GDP per capita is about 12 percent higher by 2070, offsetting roughly 30 percent of the projected ageing-related decline.
  - Policy recommendations:
    - Mid-career reskilling, lifelong learning, flexible work arrangements, workplace adaptation.
    - Policies to tackle age discrimination and expand continuous training.
    - Health interventions to mitigate non-communicable diseases and ageing-related health concerns.

- Scenario 2: Increasing Youth Labor Force Participation (Ages 15-29)
  - Assumptions:
    - Participation among ages 20–29 rises to participation rate of 30–34 age group (87%).
    - Participation among ages 15–19 doubles from 14% to 27.8%.
  - Contextual statistics:
    - Youth unemployment stood at 15.6 percent in 2024, compared with 5.2 percent for the overall population.
  - Outcome: GDP per capita rises by about 4 percent by 2070, offsetting roughly 14 percent of the projected ageing-related decline.
  - Policy recommendations:
    - Smooth education-to-work transitions: expanded post-secondary and tertiary access, apprenticeships, work-based learning.
    - Ensure labor market regulations and minimum wages do not dissuade hiring inexperienced workers.
    - Active labor market policies, job-search assistance, apprenticeships, and demand-linked interventions to reduce skills mismatches.

- Scenario 3: Raising the Statutory Retirement Age (Ages 65-69)
  - Assumption: participation among ages 65–69 rises to current participation rate of 60–64 cohort (about 37%).
  - Outcome: simulated GDP per capita is around 8 percent higher by 2070, offsetting roughly 21 percent of the projected ageing-related decline.
  - Policy caveats:
    - Mauritius has begun raising eligibility ages for some pension benefits; further increases may face social and political constraints.
    - Retirement-age increases need complementary measures: employability, job quality, health support, skills updating, flexible arrangements.

- Scenario 4: Increasing Female Labor Force Participation
  - Baseline participation rates: women 58.2 percent; men 78.6 percent.
  - Two counterfactuals:
    - Full closure of gender participation gap within each age group.
    - Reduction of age-specific gap by half.
  - Outcomes:
    - Fully closing the gap would raise GDP per capita by about 17 percent by 2070, offsetting roughly 42 percent of the projected ageing-related decline.
    - Halving the gap would increase GDP per capita by around 8 percent, offsetting 21 percent of the demographic drag.
  - Policy recommendations:
    - Improved access to childcare and eldercare, flexible and part-time work, stronger enforcement of equal treatment in hiring, pay, and career progression.
    - Structural fiscal policies (e.g., spending on early childhood education, active labor market programs) can increase female participation.

- Overall scenario insight:
  - Largest gains come from mobilizing older workers and increasing female participation.
  - No single labor-market policy is sufficient to fully offset demographic drag; combinations of labor-market reforms and broader productivity improvements are essential.

### E. Fiscal Implications of Stronger Growth Under Reform Scenarios
- Mechanism: higher participation raises output, broadens the tax base, and improves the macroeconomic environment for fiscal adjustment.
- Method: simulated GDP gains from labor-supply scenarios translated into constant annual additions to baseline real GDP growth through 2040; these higher-growth paths incorporated into the IMF Sovereign Risk and Debt Sustainability Framework linked to a full macroframework to assess public debt dynamics and broader fiscal outlook.

### Methodology and scope (extension into macro-fiscal framework)
- Exercise inserts Scenario Growth Paths into the IMF’s general equilibrium macroeconomic framework and Debt Sustainability Analysis for Mauritius.
- Covers scenarios for older workers, youth participation, and female labor force participation, including both full and partial closure of the gender participation gap.
- Fiscal effects of pension reforms are covered separately in Annex IV in the 2026 Staff Report for Mauritius.

### Scenario impacts on debt-to-GDP ratios
- Baseline
  - Long term growth is estimated at 3.2 percent per year under the baseline.
  - Debt-to-GDP ratio in 2040: 96 percent
- Scenario 1: Increasing participation among older workers
  - Annual growth add-on through 2040: +0.60 pp per year
  - Debt-to-GDP ratio in 2040: 86 percent
- Scenario 2: Increasing youth labor force participation
  - Annual growth add-on through 2040: +0.27 pp per year
  - Debt-to-GDP ratio in 2040: 91 percent
- Scenario 4a: Increasing female labor force participation (full closure of the gender gap)
  - Annual growth add-on through 2040: +0.98 pp per year
  - Debt-to-GDP ratio in 2040: 80 percent
- Scenario 4b: Increasing female labor force participation (half closure of the gender gap)
  - Annual growth add-on through 2040: +0.51 pp per year
  - Debt-to-GDP ratio in 2040: 88 percent

### Key findings from scenario analysis
- Labor-supply reforms can materially mitigate the growth effects of ageing, but no individual measure fully offsets the projected demographic drag.
- Largest gains come from measures that expand participation where current gaps are greatest—particularly among women and older workers.
- Stronger growth under these reform paths broadens the tax base and eases the adjustment burden within the macro-fiscal framework, improving public debt dynamics.

### Policy implications and recommendations
- Reform priorities should balance impact with feasibility.
- Measures to raise female labor force participation are especially promising because they:
  - Offer relatively large potential gains.
  - Can be advanced gradually through childcare provision, flexible work arrangements, and stronger equal-opportunity enforcement.
- Measures to support longer working lives should be central, particularly via:
  - Reskilling.
  - Healthier ageing.
  - Age-inclusive labor market practices.
- Increasing the statutory retirement age:
  - May be beneficial but estimated gains are smaller.
  - Likely more politically constrained and may need to proceed gradually and alongside broader pension reforms.

### Limitations and complementary needs
- Labor-supply measures alone cannot fully solve ageing-related challenges; even ambitious participation reforms leave a substantial residual growth gap.
- Mauritius will also need stronger productivity growth to sustain living standards and fiscal sustainability over time.
- Complementary structural reforms recommended include:
  - Increasing investment.
  - Improving skills.
  - Boosting innovation.
  - Strengthening the business environment.
  - Tackling production bottlenecks.
- Labor-supply reforms should be considered one pillar of a broader strategy to adapt the economy to an older and smaller population.

*Source: IMF staff calculations and analysis as presented in the chapter excerpt (paragraphs 22–27).*

### 2070. Relative to a counterfactual of unchanged demographics, GDP would be nearly 50 percent lower by

### sipea2026081 - 2070. Relative to a counterfactual of unchanged demographics, GDP would be nearly 50 percent lower by

### A. Demographic Trends and Macroeconomic Context
- Mauritius is experiencing one of the fastest population ageing processes among its peers.
- Old-age dependency ratio (population aged 65+ relative to those aged 15-64) is projected to rise sharply.
- Fertility stood at 1.4 births per woman in 2024, well below the replacement rate.
- Out-migration, particularly among skilled workers, compounds pressures; total population fell to about 1.24 million at end-2024.
- Long-run projections: total population is projected to decline nearly 30 percent by 2070.
- First-order macroeconomic implications:
  - Smaller labor force reduces growth potential unless offset by higher participation, productivity gains, or migration.
  - Ageing increases pressure on public finances through pensions, healthcare, and age-related spending.
  - Combination of negative population growth, declining working-age share, and rising elderly population will exert a sizeable drag on economic growth and intensify fiscal pressures.

### B. Analytical Framework and Methodology
- Growth decomposition framework: GDP = N × (WA/N) × (L/WA) × (Y/L), where:
  - N = total population,
  - WA/N = working-age population share,
  - L/WA = labor force participation rate of working-age population,
  - Y/L = output per worker (productivity).
- Two simplifying assumptions:
  - Labor productivity per worker (Y/L) is held constant over time.
  - Age-specific labor force participation rates remain fixed across time.
- Under these assumptions, demographic contributions to GDP growth decompose into:
  - a. Population size effect (N);
  - b. Retirement effect (WA/N);
  - c. Composition effect within working-age population (L/WA).
- Data sources:
  - United Nations World Population Prospects (median fertility scenario, 5-year age bands) for population projections.
  - International Labor Organization estimates based on Mauritius’ 2023 Continuous Multipurpose Household Survey for labor force participation rates (5-year age bands, disaggregated by gender).

### C. Baseline Results: the Demographic Drag on Growth
- Historical shift: until mid-2010s, rising working-age population supported growth; around 2017 demographic contribution turned negative.
- Projected drag: demographic pressures could reduce annual GDP growth by about 2 percentage points per year by 2070.
  - Approximately half of this drag reflects declining population size.
  - The remainder stems from ageing via falling working-age share and less favorable age composition.
- Cumulative level effects by 2070:
  - GDP in 2070 would be nearly 50 percent lower relative to a counterfactual of no demographic change.
    - Roughly half of this fall is due to population size effects; the other half due to ageing.
  - GDP per capita could be about 28 percent lower between 2025 and 2070 if productivity gains do not compensate.
    - Shrinking working-age share accounts for almost 27 percentage points of the per capita reduction.
    - Changes in participation within working-age cohorts contribute less than 2 percentage points.

### D. Scenario Analysis: Labor Supply Policies to Mitigate Demographic Headwinds
- Approach: partial-equilibrium scenarios adjust age-specific participation rates beginning in 2026; simulations abstract from productivity gains, capital deepening, labor demand effects, transition dynamics, and migration policy.

- Scenario 1: Increasing Participation Among Older Workers (ages 50-64)
  - Assumption: participation rates for ages 50–64 rise to the contemporaneous participation rate of the 45–49 cohort (79%); other age-specific rates unchanged.
  - Outcome: simulated GDP per capita is about 12 percent higher by 2070, offsetting roughly 30 percent of the projected ageing-related decline.
  - Policy recommendations:
    - Mid-career reskilling, lifelong learning, flexible work arrangements, workplace adaptation.
    - Policies to tackle age discrimination and expand continuous training.
    - Health interventions to mitigate non-communicable diseases and ageing-related health concerns.

- Scenario 2: Increasing Youth Labor Force Participation (Ages 15-29)
  - Assumptions:
    - Participation among ages 20–29 rises to participation rate of 30–34 age group (87%).
    - Participation among ages 15–19 doubles from 14% to 27.8%.
  - Contextual statistics:
    - Youth unemployment stood at 15.6 percent in 2024, compared with 5.2 percent for the overall population.
  - Outcome: GDP per capita rises by about 4 percent by 2070, offsetting roughly 14 percent of the projected ageing-related decline.
  - Policy recommendations:
    - Smooth education-to-work transitions: expanded post-secondary and tertiary access, apprenticeships, work-based learning.
    - Ensure labor market regulations and minimum wages do not dissuade hiring inexperienced workers.
    - Active labor market policies, job-search assistance, apprenticeships, and demand-linked interventions to reduce skills mismatches.

- Scenario 3: Raising the Statutory Retirement Age (Ages 65-69)
  - Assumption: participation among ages 65–69 rises to current participation rate of 60–64 cohort (about 37%).
  - Outcome: simulated GDP per capita is around 8 percent higher by 2070, offsetting roughly 21 percent of the projected ageing-related decline.
  - Policy caveats:
    - Mauritius has begun raising eligibility ages for some pension benefits; further increases may face social and political constraints.
    - Retirement-age increases need complementary measures: employability, job quality, health support, skills updating, flexible arrangements.

- Scenario 4: Increasing Female Labor Force Participation
  - Baseline participation rates: women 58.2 percent; men 78.6 percent.
  - Two counterfactuals:
    - Full closure of gender participation gap within each age group.
    - Reduction of age-specific gap by half.
  - Outcomes:
    - Fully closing the gap would raise GDP per capita by about 17 percent by 2070, offsetting roughly 42 percent of the projected ageing-related decline.
    - Halving the gap would increase GDP per capita by around 8 percent, offsetting 21 percent of the demographic drag.
  - Policy recommendations:
    - Improved access to childcare and eldercare, flexible and part-time work, stronger enforcement of equal treatment in hiring, pay, and career progression.
    - Structural fiscal policies (e.g., spending on early childhood education, active labor market programs) can increase female participation.

- Overall scenario insight:
  - Largest gains come from mobilizing older workers and increasing female participation.
  - No single labor-market policy is sufficient to fully offset demographic drag; combinations of labor-market reforms and broader productivity improvements are essential.

### E. Fiscal Implications of Stronger Growth Under Reform Scenarios
- Mechanism: higher participation raises output, broadens the tax base, and improves the macroeconomic environment for fiscal adjustment.
- Method: simulated GDP gains from labor-supply scenarios translated into constant annual additions to baseline real GDP growth through 2040; these higher-growth paths incorporated into the IMF Sovereign Risk and Debt Sustainability Framework linked to a full macroframework to assess public debt dynamics and broader fiscal outlook.

*Prepared by Athene Laws (AFR).*

### 22. This approach goes beyond a mechanical exercise by allowing the stronger growth paths to

### 22. This approach goes beyond a mechanical exercise by allowing the stronger growth paths to

### Methodology and scope
- Exercise inserts Scenario Growth Paths into the IMF’s general equilibrium macroeconomic framework and Debt Sustainability Analysis for Mauritius.
- Covers scenarios for older workers, youth participation, and female labor force participation, including both full and partial closure of the gender participation gap.
- Fiscal effects of pension reforms are covered separately in Annex IV in the 2026 Staff Report for Mauritius.

### Scenario impacts on debt-to-GDP ratios
- Baseline
  - Long term growth is estimated at 3.2 percent per year under the baseline.
  - Debt-to-GDP ratio in 2040: 96 percent
- Scenario 1: Increasing participation among older workers
  - Annual growth add-on through 2040: +0.60 pp per year
  - Debt-to-GDP ratio in 2040: 86 percent
- Scenario 2: Increasing youth labor force participation
  - Annual growth add-on through 2040: +0.27 pp per year
  - Debt-to-GDP ratio in 2040: 91 percent
- Scenario 4a: Increasing female labor force participation (full closure of the gender gap)
  - Annual growth add-on through 2040: +0.98 pp per year
  - Debt-to-GDP ratio in 2040: 80 percent
- Scenario 4b: Increasing female labor force participation (half closure of the gender gap)
  - Annual growth add-on through 2040: +0.51 pp per year
  - Debt-to-GDP ratio in 2040: 88 percent

### Key findings (from scenario analysis)
- Labor-supply reforms can materially mitigate the growth effects of ageing, but no individual measure fully offsets the projected demographic drag.
- Largest gains come from measures that expand participation where current gaps are greatest—particularly among women and older workers.
- Stronger growth under these reform paths broadens the tax base and eases the adjustment burden within the macro-fiscal framework, improving public debt dynamics.

### Policy implications and recommendations
- Reform priorities should balance impact with feasibility.
- Measures to raise female labor force participation are especially promising because they:
  - Offer relatively large potential gains.
  - Can be advanced gradually through childcare provision, flexible work arrangements, and stronger equal-opportunity enforcement.
- Measures to support longer working lives should be central, particularly via:
  - Reskilling.
  - Healthier ageing.
  - Age-inclusive labor market practices.
- Increasing the statutory retirement age:
  - May be beneficial but estimated gains are smaller.
  - Likely more politically constrained and may need to proceed gradually and alongside broader pension reforms.

### International evidence and context
- Japan: Structural reforms supporting higher participation among women and older workers can partly reverse output losses associated with ageing and population decline; broader macroeconomic conditions and policy credibility also matter for fiscal outcomes.
- Sweden: Pension reforms should be part of a broader package supporting longer working lives, including better health and educational attainment among older cohorts, age-compatible work environments, and institutions that strengthen incentives to remain employed.

### Limitations and complementary needs
- Labor-supply measures alone cannot fully solve ageing-related challenges; even ambitious participation reforms leave a substantial residual growth gap.
- Mauritius will also need stronger productivity growth to sustain living standards and fiscal sustainability over time.
- Complementary structural reforms recommended include:
  - Increasing investment.
  - Improving skills.
  - Boosting innovation.
  - Strengthening the business environment.
  - Tackling production bottlenecks.
- Labor-supply reforms should be considered one pillar of a broader strategy to adapt the economy to an older and smaller population.

*Source: IMF staff calculations and analysis as presented in the chapter excerpt (paragraphs 22–27).*

---


_Source: https://www.imf.org/-/media/files/publications/selected-issues-papers/2026/english/sipea2026081.pdf_