Overview

  • The Republic of Seychelles lies to the northeast of Madagascar, an archipelago of 115 islands with almost 95,000 inhabitants (2016), ¾ of whom live on the main island of Mahé. Seychelles has the highest Gross Domestic Products (GDPs) per capita in Africa ($15,410 in 2016), but increasingly the effects of climate change are placing its economy—which relies heavily on high-end tourism and exports of tuna—at risk.

    Political Context

    Independent since 1976, the Seychelles is a relatively young democracy: the first multiparty presidential election was held in 1993, after the adoption of a new constitution. A presidential election in December 2015 was closely-fought, and President James Michel narrowly elected for a third and last term by just 193 votes out of the 62,831 valid votes cast. He resigned in October 2016, and was replaced by his then deputy, Danny Faure, who has since been sworn into office.

    President Faure did not stand for the leadership of the governing Parti Lepep during its elective congress in June 2017, saying he wished to separate partisan politics from his role as head of state. In his place, Vincent Meriton, Vice-President of the Republic, was elected the party’s president.

    In September 2016, legislative elections were held, with the opposition coalition winning the country’s parliamentary elections for the first time. The Linyon Demokratik Seselwa (LDS) is a coalition of four main parties, including the Seychelles National Party (SNP), which had boycotted previous parliamentary polls in 2011. The LDS holds 19 seats in the Sixth National Assembly, while Parti Lepep retains 14 seats. This is the first time since the return of multi-party democracy in 1993 that Parti Lepep has not had a parliamentary majority. Before the elections, Parti Lepep held all 25 directly elected seats in the assembly and an additional 7 proportionate seats, leaving just 1 seat held by the opposition.

    Elections for district boards will be held in 2018. The next presidential election is due only in 2020. 

    Economic Overview

    The strong tourism sector has continued to buoy up Seychelles’ economy; the number of visitors rose by 9.8% in 2016 to reach a record high of over 300,000 (three times to the size of the local population). Up to July 2017, visitor arrivals were up 21.2% over the same period last year.

    Overall, output is estimated to have increased by 4.4% in 2016. 

    Despite the robust pace of growth, the economy does not appear to be overheating. Inflation picked up, to 3.2% year-on-year in July 2017, but this reflects supply-side pressures from increases in administered tobacco prices and tariffs. Food prices have remained moderate (with inflation at about 2%). Private sector credit growth stood at 8.0% year-on-year at the end of Q1 2017.

    The external position has been sound: the merchandise trade deficit has remained broadly stable, at about $450m on a 12-month rolling basis through June 2017. The Seychellois rupee has depreciated slightly against the US Dollar (by 1.2% in 2017 through July), while gross official reserves have remained little-changed, at $545m in June (equivalent to 4.2 months import cover).  

    The budget, passed in February for the current calendar year, set a target of a primary, fiscal surplus of 3.0% of GDP, which is consistent with the government’s goal of continuing to reduce its debt burden. This debt burden has continued despite substantial, primary surpluses recorded in recent years and, as such, the Seychelles' fiscal stance is broadly neutral for growth.

    For the third quarter of 2016, the unemployment rate was 4.5%, indicative of a tight labor market in line with robust recent economic conditions. Rising demand for labor has been met by a surge in expatriate workers, their numbers measured by new and renewed Gainful Occupation Permits, which rose to 16,792 in 2016, an approximate doubling since 2014 to account. Expatriates now account for about a quarter of the Seychelles' total workforce, and are employed mostly in construction and tourism.

    Outlook

    In view of the ongoing robustness of tourism, the baseline growth outlook remains favorable, although the current pace of real GDP growth, of above 4%, is expected to moderate itself to about 3.5% as construction linked to new tourism slows (a moratorium on new permits for large hotels was extended recently to 2020).

    Debt dynamics are positive, although the Seychelles remains highly vulnerable to exogenous shocks. This vulnerability is due to the significant public debt burden of approximately 70% of GDP, and Seychelles’ very small, tourism- and import-dependent economy. Since the 2008 global debt crisis, however, the country has made major progress in reducing public debt and maintaining macroeconomic stability.

    This progress is expected to continue to play out in terms of the economy's baseline scenario, allowing public debt/GDP to fall to the 50% level in 2020, as targeted by the government.  

    Challenges

    Seychelles has a very small population in a relatively isolated location. This makes it reliant on external demand, especially tourism. Its small pool of local skilled labor and high cost of external transport and energy present a challenge in terms of deepening or diversifying its sources of growth.

    Its also has to consolidate its major gains in macroeconomic and fiscal management, and in institutional development, that have marked the period since its 2008 debt default. Continuing to develop a more efficient, focused public sector can help bring down costs and support a more inclusive private sector. The key, longer-term challenge is to improve educational outcomes and thus strengthen the quantity and quality of skills available to the economy. 

    Last Updated: Oct 12, 2017

  • World Bank Group Engagement in Seychelles

    The WBG strategy with Seychelles is being updated with the aim of completing it by the end of FY18. The WBG has recently completed its Systematic Country Diagnostic (SCD) on the island nation, a move that is deemed the first step in the preparation of a new strategy. The SCD characterizes Seychelles’ inclusive growth challenges as “the 3Ps”: Productivity to sustain growth which has hitherto been driven by high investment and expatriate labor; Participation to revamp the education and social protection systems to maintain inclusion in a high-income economy; and, Performance building on the past decade of macro stabilization and reforms to bring the efficiency and efficacy of state services and State Owned Enterprises (SOEs) into line with the needs of a high income economy. Concurrently, the government is working on its National Development Strategy, to be adopted in June 2018, which have been informed by sector strategy plans due by the end of 2017, and which will also inform the CPF.

    The World Bank program consists of a range of analytical work, much of which is financed through reimbursable arrangements, also known as Reimbursable Advisory Services, that provide technical assistance in public financial management, SOE reform, and the social sectors. 

    Last Updated: Oct 12, 2017

  • 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: Oct 12, 2017

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

    Last Updated: Oct 12, 2017

Api


LENDING

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

*Amounts include IBRD and IDA commitments


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Additional Resources

Country Office Contacts

Main Office Contact
1 Rue Andriamifidy
BP 4140
Antananarivo 101, Madagascar
+261-20-22-560-00
Maputo, Mozambique
Rafael Saute
Sr. Communications Officer
Av. Kenneth Kaunda, 1224
Maputo, Mozambique
+258-21-482-944
rsaute@worldbank.org
Washington
Thomas Buckley
Country Program Coordinator
1818 H Street NW
Washington, DC 20433
+1-202-473-0075
tbuckley@worldbank.org