The Republic of Seychelles is a remote, small island-state with middle income country characteristics and an estimated population of 88,300 (2012). Seychelles comprises 115 tropical islands spread over 1.374 million square kilometers in the western Indian Ocean, covering 455.3 square kilometers in land area. Habitation is limited to 10 of the islands, and approximately 90% of the population of Seychelles live in the largest island, Mahé (60% urbanized), where the capital, Victoria, and the main fishing port are located.
The Seychelles enjoys a stable political system. Independent since 1976, it is a relatively young democracy. The first multiparty presidential election was held in 1993, after the adoption of a new constitution. In the last election (May 2011), the incumbent president, James Michel, was reelected for another five-year term with a comfortable majority (55% of votes).
A small, service-based, middle-income, island-state economy with a GDP per capita of US $ 15,644 in 2013, Seychelles is classified as a high-middle-income country. The nation enjoys good public sector governance, ranking 5th in the Ibrahim Index of African Governance in 2014. Seychelles has already achieved most of the Millennium Development Goals, especially for education, health, poverty eradication, and the environment. Poverty in Seychelles is relatively low, with less than 2% of the population living on less than US$ 2 per day.
Economic growth in Seychelles is projected to accelerate to 3.7% in 2014. This will be dependent on increasing number of tourists during the second half of the year based on an uptick in arrivals and new flight connections to Europe. Unemployment, although growing, remains low at around 5.2%.
Fiscal performance continues to be strong supported by expenditure containment. The current account deficit improved in 2013, mainly due to increased tourism and tuna exports, and was comfortably financed by foreign direct investment (FDI). A recent rise in imports and fall in tourism growth has put some emergent pressures in the foreign exchange market. The authorities have accelerated monetary tightening to curb strong credit growth. A comfortable level of international reserves at US$456 million (3.9 months of imports) and a flexible exchange rate will support this process although it will require careful monitoring given the shallow foreign exchange market. Also, inflation is expected to increase to 5.3% by the end of the year due to rupee depreciation and large dependence on imports.
Potential downside risks are manageable. The economy remains highly dependent on tourism but diversification to non-traditional tourism markets continues. Credit and money growth is being curbed and the exchange rate is being adjusted. The government’s comfortably external reserves, a flexible exchange rate, high government deposits, and a fiscal surplus provide some bulwark against external shocks.
Last Updated: Oct 10, 2014