Réunion Island recorded economic growth of +1.1% in 2025 — a rebound after the near-stagnation of 2024 (+0.5%). But the first months of 2026 paint a more nuanced picture: the unemployment rate has climbed back to 18% in Q1, and more than 1,100 companies remain under judicial reorganization proceedings. A review of an island economy still in recovery mode.
A rebound driven by public spending and consumption
According to INSEE and CEROM, the 2025 recovery rested on two pillars: public expenditure (+2.5%), partly driven by post-cyclone reconstruction, and household consumption (+1.2%). Inflation fell sharply to 1.4% in 2025 (from 2.8% in 2024), gradually restoring purchasing power. Investment also rebounded by 1.6% after a marked decline the previous year.
The labour market tightens again in 2026
This rebound masks a more worrying reality. The unemployment rate reached 18% in Q1 2026 — up 2 percentage points year-on-year — even as salaried employment held steady at 294,700 positions. This paradox is explained by previously discouraged workers re-entering the labour market: the active population is growing faster than job creation.
1,100 companies in difficulty, construction hardest hit
The business fabric still bears the scars of successive crises. More than 1,100 companies are under judicial reorganization in Réunion — a 30% increase compared to 2023. The construction and public works sector is particularly hard hit: over 600 cases before commercial courts and around 2,000 jobs lost in the sector. Industry federations describe the situation as a "sectoral recession" and are calling for the Lodeom support scheme to be maintained.
Why it matters
Réunion Island illustrates the fragility of island economies facing external shocks. While the macroeconomic indicators for 2025 appear encouraging, the microeconomic signals for 2026 tell a different story: a labour market under renewed pressure, struggling businesses, and a construction sector in deep crisis. The relaunch of the New Coastal Road (NRL), included in the 2026 regional budget, offers concrete hope — but Réunion's economy will need more than one major project to return to inclusive, sustainable growth.
Sources: INSEE / CEROM, Réunion economic review 2025; La1ère Réunion, judicial reorganization report, 2026.