Economic Outline

Economic Indicators

The Republic of Seychelles is an archipelago of 115 islands, with three-quarters of the population living on the main island of Mahé. The country stands as a high-income nation with the highest GDP per capita in Sub-Saharan Africa, yet remains highly susceptible to external disruptions. Tourism constitutes 31% of GDP and 41% of exports. With over 90% of production inputs imported, the country faces significant exposure to global commodity shocks and pandemics. In 2023, growth slowed to an estimated 3.3% from 8.9% in 2022. This deceleration was influenced by modest upticks in tourism, notably from European markets affected by tight monetary conditions and the conflict in Ukraine. Additionally, geopolitical tensions in Israel impacted tourist arrivals from Asia. The economy is forecasted to expand by 3.5% in 2024, bolstered by tourism and augmented flight seat capacity to the islands (data World Bank). The anticipated addition of 450 new hotel rooms throughout the year is expected to drive up tourism receipts. Nevertheless, sluggish trade and commerce within the Providence industrial zone, stemming from the gradual recovery following a 2023 explosion which caused severe damages, are likely to dampen growth.

Effective macroeconomic management has enabled Seychelles to navigate shocks and sustain growth. Pandemic mitigation measures facilitated a swift recovery and were gradually phased out. Since 2021, the government has pursued fiscal consolidation and implemented measures to enhance economic resilience while addressing external shocks. Investments in climate resilience, primarily financed through concessional funding and supported by private sector initiatives, have been prioritized. Fiscal strategies like the 2023 tourism environmental sustainability levy contribute to funding climate initiatives, with over 4% of the Seychelles' budget allocated to climate resilience efforts. In 2023, the primary fiscal balance stood at 1.4% of GDP, driven by increased revenue, particularly from robust business and property tax collections. Despite higher government spending due to increased public sector wages and the establishment of the Home Care Agency, public debt decreased to 60.1% of GDP, aided by external debt repayments. Capital expenditure allocation was higher than in 2022, yet under-execution of projects led to budget savings. However, following the December 2023 incidents, additional spending beyond planned investments is necessary, expected to elevate public debt to 62% of GDP (data World Bank). Nevertheless, the government remains committed to containing public debt in the medium term and strengthening the government securities market through bond issuance to mitigate refinancing risk. Inflation remained low, prompting the Central Bank of Seychelles to maintain the monetary policy rate at 2%. In 2023, appreciation of the rupee and moderation in global commodity prices contributed to declining domestic prices, with year-end inflation of -2.71%. In the context of low inflation expectations, the monetary authority is expected to maintain the monetary policy rate at 2% in 2024. Since introducing the Seychelles International Business Companies Act in 1994, over 200,000 companies have been registered and new offshore companies continue to register each month. Seychelles is at the forefront of the "blue economy" movement focused on using oceans for economic growth, and improved livelihoods and jobs while maintaining the ocean's ecosystem. In the last decade, more intense structural reforms have been implemented, focusing on fiscal reform, the restructuring of state companies and financial system regulations.

Seychelles has the highest literacy rate and the best healthcare system in the East Africa region. As per the National Bureau of Statistics, in Q4/2023, the average number of employed persons across all sectors was 54,931, with average earnings amounting to SCR 16,710. This reflects a 0.5% rise in employment numbers and a 10.1% increase in average earnings compared to the corresponding quarter in 2022. Despite external shocks, average earnings have risen by 4.8%, while the poverty rate remained stable at 5.9% in 2023 (World Bank). Given the limitations on land, labour and the fragile environment, economic growth will have to rely on increases in productivity in the medium term.

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