Overview

Economic Overview

Following a major economic crisis in 2008, Seychelles has managed a turnaround in restoring fiscal sustainability and laying the groundwork for growth.  The government’s attention has turned increasingly toward consolidating progress on debt sustainability and increasing resilience by putting Seychelles on a higher, private sector-led growth trajectory.

The economic performance of the Seychelles in 2015 was strong. The country was reclassified as a high income economy by the World Bank in June 2015 as GNI per head (Atlas method) climbed to $14,100. Output grew by 4.3%, supported by a 19%  increase in tourist arrivals.

Benefiting from strong tourism receipts, as well as lower energy import costs, the current account deficit narrowed sharply in 2015, from 22% of gross domestic product (GDP) in 2014 to 15.2%. Foreign direct investment, notably in the hospitality sector, remained sufficient to largely finance the current account deficit and the economy continued to build up international reserves, which reached the equivalent of 4.3 months of imports in 2015.

Consistent with the strengthening of Seychelles’ external balances in 2015, the rupee appreciated by 6%  against the US Dollar, despite the general strengthening of the latter. In turn, falling import costs, helped by lower global energy and food costs, pushed inflation down to 4.4%  at the end of 2015. With monetary policy stance remaining tight as the authorities continued to prioritize macroeconomic stability following the previous, marked weakening of the currency and higher inflation, private sector credit growth cooled, to 14.3%  in 2015 from 25.7%  in 2014.

The fiscal position strengthened on the back of robust growth, with taxes proving buoyant (tax revenue to GDP rose by 0.6 percentage points, to 31.6%), coupled with ongoing expenditure restraint. Overall, the primary fiscal surplus for 2015 was 3.8% of GDP, narrowing from 4.4% in 2014. This was sufficient to reduce public debt to 63.7% of GDP in 2015, down from 66%  of GDP in 2014.

Challenges

Low unemployment statistics and high labor force participation (70%  in 2015) mask several structural weaknesses. Skill mismatches remain a key factor in unemployment and job creation. Youth unemployment is about three times higher than national unemployment, with female youth unemployment ranking nine percentage points higher than male youth unemployment.

Poverty rates in Seychelles are expected to remain among the lowest in the world outside the Organization for Economic Cooperation and Development (OECD). Recent estimates show that extreme poverty, using the international poverty line of $1.9 per day in 2011 purchasing power parity (PPP), stood at 1.1%  of the population in 2013. Moderate poverty based on the $3.1 per day (in 2011 PPP) poverty line was 2.5%  of the population in 2013. However, inequality is a concern with the gross income-based Gini index of 0.46 in 2013, pointing to distributional issues in the country.

Political Context

Independent since 1976, Seychelles is a relatively young democracy with  a stable political system. The first multiparty presidential election was held in 1993, after the adoption of a new constitution. The latest presidential elections took place in December 2015. The incumbent President James Michel was narrowly elected to a third term, by just 193 votes out of 62,831 valid votes cast, following a hard-fought election which required the first-ever run-off vote. This will be the president’s final term under the constitutional three-term limit.

Last Updated: Apr 01, 2016

World Bank Group Engagement in Seychelles

The World Bank Group (WBG) is currently implementing a five-year Country Partnership Strategy (CPS) designed in consultation with stakeholders in Seychelles and discussed by the World Bank Board in April 2012. This document supports the Seychelles Medium-Term National Development Strategy 2013-2016 (MTNDS), which sets out the vision and goals towards reducing Seychelles’ vulnerability and providing a basis for long term sustainable development.

The CPS outlines the strategic direction for the World Bank’s program for Seychelles for the period 2012–2015. The reform program supported by this strategy is organized into two pillars,  competitiveness and employment and vulnerability and resilience and one foundation (governance and public sector capacity). As the current strategy reaches its final year of implementation, the World Bank has initiated the preparation of a Systematic Country Diagnostic on the island nation, deemed a first step in the preparation of a new strategy.  

The World Bank program consists of a multi-sectorial programmatic Development Policy Operations series backed by analytical work, much of which is financed through reimbursable arrangements. In October 2015, the World Bank approved a $5 million financing aimed at Sustaining Reforms for Inclusive Growth in the form of a Development Policy Lending operation. The recent progress report of the CPS outlines a lending program that includes the first of a three-year $4 million per operation series as well as a continuation of a series totaling $5 million per year, known as the Accelerated Program for Economic Integration (APEI). Three ongoing Reimbursable Advisory Services (RAS) Agreements are under implementation providing technical assistance in the areas of financial sector, Public Financial Management, State-owned enterprise reform, and the social sectors. 

Last Updated: Apr 01, 2016

The World Bank has delivered, in close collaboration with the International Monetary Fund (IMF), delivered two stand-alone Development Policy Loans (DPL) amounting to $18 million, and three operations totaling $7 million under a Development Policy Operation series approved by the World Bank Board in September 2013, 2014, and 2015. In addition, a DPL of $7 million with a Catastrophe Deferred Drawdown Option was approved in September 2014 to help strengthen the country’s ability to manage disaster risks.

These policy operations focus on catalyzing private sector growth, improving governance and public resource management, and building resilience. These reforms have been instrumental in improving the country’s business climate, enhancing fiscal transparency, improving public financial management and increasing fiscal oversight and control of public enterprises.

Last Updated: Apr 01, 2016

The World Bank works in collaboration with other development partners of Seychelles, including with the International Monetary Fund (IMF). 

Last Updated: Apr 01, 2016


LENDING

Seychelles: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments