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 $12.3 billion (2020). It 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 majority of seats in the national parliament.
Economic Developments and Outlook
The economic and social shock from COVID-19 on the Seychelles was severe. Economic growth declined significantly in 2020 to --7.7% from 3.1% in 2019 due to the significant disruptions in economic activities, including lower tourism, which plummeted by more than 60%. The fiscal deficit widened to 17.8% of gross domestic product (GDP) in 2020 because of lower revenues and higher COVID-19-related spending.
In 2021 the economy begun to recover from COVID-19 (coronavirus) with an estimated growth rate of 7.9% due primarily to a recovery in the tourism sector. Tourist arrivals rebounded in 2021 following the reopening of borders in late March 2021, and the emergence of new tourist markets (Russia, UAE and Israel). The fiscal deficit declined from 18.4% in 2020 to 9.1% of GDP in 2021 driven by the withdrawal of the COVID-19 fiscal support package which represented a significant part of transfers in 2020 as well as fiscal adjustment undertaken by the government.
Economic growth is expected to moderate to 4.6% in 2022 due to the impact of the Russian invasion of Ukraine on the Seychellois economy. Russia's invasion of Ukraine and the resulting sanctions have caused a cessation of international flights by Russia's national airline, Aeroflot, including to Seychelles, which will directly affect tourist arrivals. In addition, the increase in fuel prices will cause airfares to rise and this uncertainty will discourage people from travelling. Thus, potentially affecting other tourist markets. The increase in commodity prices (oil and wheat) is also expected to affect the value of imports and cause a deterioration in the current account as well as a hike in inflation. If unmitigated, the poor are expected to bear a disproportionate impact of the rising food prices.
While the immediate priority is containing 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 a focus on greater productivity, participation and performance of the 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; 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.
Last Updated: Apr 15, 2022