The Republic of Seychelles lies northeast of Madagascar, an archipelago of 115 islands. The country has a total population of 107,000 inhabitants, three-quarters of whom live on the main island of Mahé. Seychelles has the highest gross domestic product (GDP) per capita in Africa, at $ 15.8 billion (2022). Its economy is highly dependent on tourism and fisheries, and climate change poses long-term sustainability risks.
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. The latest presidential and parliamentary elections took place in October 2020, bringing an opposition candidate, Wavel Ramkalawan, to the Presidency for the first time since the introduction of democratic elections. Ramkalawan’s Linyon Demokratic Sesel party also won the most seats in the national parliament. With well-established democratic institutions, Seychelles' political environment is expected to remain stable. The next general election will take place in 2025.
Economic Developments and Outlook
Seychelles is the most prosperous nation in Sub-Saharan Africa. The economy remains highly dependent on tourism, making it highly vulnerable to global macroeconomic developments. Investor interests in the blue economy sector are growing. Fisheries remain the largest sector after tourism.
Growth reached 9% in 2022, before moderating to 4.3% in 2023. Average inflation fell to 2.6% in 2022 and is projected to decline to 1.4% in 2023, averaging 1.7% in the medium-term. This reflects a moderation in global energy and food prices and recovering private consumption. The Seychelles currency Rupee is expected to remain strong and slightly appreciate to SRs13.3 per US dollar by end-2024, supported by modest flows of foreign exchange into the tourism sector. Slower economic growth is also reflected in employment numbers. In the first quarter (Q1) of 2023, total employment increased by 3.7 % while average earnings increased by 0.4 % compared to 2022 Q1, leading to a slight decrease in poverty levels, from 5.9 % in 2022 to 5.6 % in 2023. Ongoing reforms to the social protection system will ensure its sustainability and promote increased labor force participation of working-age beneficiaries, contributing to reducing poverty. Financing needs declined in 2022, due to lower spending on wages and social programs, coupled with delayed capital spending. This in turn has contributed to containing public debt, which has continued to decrease sustainably, reaching 68.3% of GDP in 2023 from 69.9% of GDP in 2022. The banking sector has remained liquid and well-capitalized but with a slight increase in non-performing loans to 7.7% in March 2023 (from 7.3% in March 2022), reflecting the easing off of related COVID-19 pandemic forbearance measures.
Among Seychelles’ development challenges is a focus on greater productivity, higher labor force participation, and improved performance of the economy as a means to increase shared prosperity. Some of the related institutional challenges are notable barriers to opening and operating businesses; inefficiencies in public sector management, such as limited statistical capacity; scope for a more strategic and sustainable approach to social protection; and the need to broaden access to quality education and skills development. Climate change adaptation, including through strengthened disaster preparedness systems and enhanced coastal management, is also key. Near-term priorities include maintaining debt sustainability, and continued reform to the social protection system to support the most vulnerable. In the medium term, the focus will be on increasing revenues and boosting capital expenditures, to invest on climate change mitigation. As part of the structural reform agenda, revenue administration, public financial management, and governance could be prioritized, including a digitalization strategy and the reform of state-owned enterprises.
Last Updated: Sep 21, 2023