National Budget 2025/26: Mixed feelings from the public, but mild pessimism on the local bourse
The broad expectations that the new government would announce measures to rein in fiscal deficit and lower public debt as a percentage of GDP was met. The budget hinges on economic renewal, a new social order and fiscal consolidation. However, with the current macroeconomic backdrop (ongoing geopolitical tensions and trade disruptions), is the projected fiscal plan feasible?
On the fiscal side, forecasting an increase of 23% in government revenue (from MUR 182bn for FY2024/25 to MUR 224bn for FY2025/26) appears rather optimistic when it relies heavily on a significant increase in personal income tax and corporate profits. The impact of austerity measures on consumption, wage growth and investment, decelerating tourist arrivals and the spillover of slowing global activity remain important headwinds. Meanwhile, government expenditure is forecasted to grow by 3.6% (from MUR 252bn for FY2024/25 to MUR 261bn for FY2025/26), the lowest increase witnessed over the last 7 years. Without a strong monetary easing to support our activity, targeting a reduction in budget deficit from 9.8% in FY2024/25 to 4.9% in FY2025/26 would be challenging.
The wave of new tax measures will certainly reshape Mauritius’ business landscape. The introduction of a 10% Alternative Minimum Tax, the Fair Share Contribution, and a 5.5% Special Bank Levy is expected to put significant pressure on financial institutions. Since the announcement of budgetary measures on 5th June till 10th June 2025, SEMDEX dropped by 2.7%. The banking duo, MCBG (-3.1% excluding dividend impact) and SBMH (-3.4%) saw their share prices slide as the rollout of new taxes undermined investor confidence.
Should the delivery of the announced measures reap the desired improvement in economic metrics, a renewal in momentum could still be expected. While the road to recovery has been laid out, its success will depend on the effectiveness of its execution.
International Markets: US equities are back in overbought territory as trade tariff tensions ease and recessionary risks drop
From the April 8th low through last Friday 6th June 2025, the S&P500 index rallied just over 20%, marking one of the strongest rallies off a 50-day low on record. And this, despite foreign investors are dumping US equities as capital is gradually going back home amid policy uncertainty. According to Goldman Sachs, foreigners sold $44 billion in US stocks over the past two months and withdrawal reached $31 billion year-to-date as at May-25.
From a technical perspective, its appears that the S&P500 index may attempt to go higher but continues to face some resistance. These short-term pullbacks may be thought of as potential buying opportunities in a market that simply just will not lay down.
Source: Yahoo finance as at 10th June 2025.
While “peak pessimism” may be past, the current bullish narrative – premised on profit resilience, stabilization of negative earnings revisions and belief in an imminent capex-driven productivity boom – is not yet fully in evidence. Caution remains warranted amid a potential resurgence in interest rate volatility, especially with the Federal Reserve still sidelined amid stubborn inflation expectations.
