The Republic of Seychelles lies northeast of Madagascar, an archipelago of 115 islands with almost 98,000 citizens, three-quarters of whom live on the main island of Mahé. Seychelles has the highest gross domestic product (GDP) per capita in Africa, at nearly $17 billion (2019), but inequality is significant, placing the prospect of continued shared prosperity in tighter focus. Climate change also 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. 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. Michel resigned in October 2016, and was replaced by his deputy, Danny Faure. In September 2016’s legislative elections the opposition coalition won the parliamentary elections for the first time. Presidential and parliamentary elections are schedule for October 2020.
Economic developments and outlook
Following the economic crisis and resulting sovereign debt default in 2008, the Republic of Seychelles through a prudent reform program made significant progress in achieving economic stability and fiscal sustainability. As a result, the economy grew by an average rate of 4.2% per annum between 2009 and 2019. With the help of an International Monetary Fund program, the government maintained its target of 2.5% primary balance and was on target to reduce the debt to GDP ratio to 50% by 2021. Prudent monetary policy also led to a build-up of the gross international reserves to 3.5 months of import coverage by 2019 from less than one month at end-2008.
The economic and social shock from COVID-19 (coronavirus) on the Seychellois economy is severe due to strong dependence on international tourism. Tourism accounts for approximately 30% of gross domestic product (GDP), making the country highly vulnerable to the current COVID-19 pandemic. The global outbreak is drastically reducing economic activity in 2020 as tourist arrivals are projected to decline by more than 50%. This is affecting other sectors such as transportation; art, recreation and entertainment; wholesale and retail trade; and the financial and insurance sector. GDP is expected to contract by 15.9% in 2020 compared to the pre-pandemic projected growth rate of 3.5%. Recovery is expected to begin in 2021 with a projected increase of 4.7% driven by a recovery in the tourist industry and a resumption in capital flows. If unmitigated, the poor are expected to bear a disproportionate impact of the economic shock. According to the 2013 household survey, about 6 out of 10 poor individual have a job, mostly in informal activities in the service sector that are expected to experience significant declines.
While the immediate priority is the containment of COVID-19 and recovery from its economic and social impact on the country, a focus on longer term structural issues is also warranted for a strong and resilient recovery.
Among Seychelles’ development challenges is the importance to focus on greater productivity, participation and performance of its economy as means to increasing shared prosperity. Some of the main institutional challenges in this regard are notably barriers to open and operate businesses, inefficiencies in public sector management, such as limited statistical capacity, scope for a more strategic and sustainable approach to social protection, as well as 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.
Last Updated: Jul 31, 2020