Seychelles: Economic and Political Overview

Economic Indicators

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The Republic of Seychelles is an archipelago of 115 islands, with three-quarters of the population living on the main island of Mahé. The country’s recent economic performance has been strong, benefiting from the continued growth of the tourism (accounting for nearly three-quarters of GDP) and fisheries sectors. After plummeting due to the COVID-19 pandemic and the travel restrictions that followed (-7.7% in 2020), the country’s GDP returned on a growth path in 2021 (+7.9%) and in 2022 (+10.6%), driven by robust tourism activity. Over the forecast horizon, the IMF projects growth to moderate to 5.4% this year and 4.9% in 2024, although downside risks persist as a worsening of economic prospects in Seychelles’ key tourism markets (Russia, the European Union, and the United Kingdom) would negatively affect the country’s economy.

Amid the recovery, there has been a significant reduction in public spending and an increase in aid for those in need. The primary fiscal deficit decreased to an estimated 1.1% of GDP in 2022, representing a considerable consolidation of 13.6 percentage points in the previous two years. The risk of unsustainable debt has been notably diminished, as the public debt-to-GDP ratio declined to around 69.9% by the end of 2022, a reduction of around 23 percentage points over two years. Over the medium term, the primary balance is anticipated to shift to a surplus as revenue measures will exceed the planned capital expenditure increase, while the debt-to-GDP ratio is projected to continue declining to 64.6% in 2023 and below 50% by 2026, according to the IMF. Moreover, the government has established a program of targeted, temporary cash transfers to alleviate the burden of rising food and fuel prices for the most vulnerable population, which is scheduled to last until early 2023. Average inflation declined to around 3% in 2022, but it is expected to rise to 4.5% in 2023, reflecting higher import prices and a fading of the cushion provided by the lagged effect of the rupee appreciation. In March 2023, IMF staff and the Seychellois authorities reached a staff-level agreement on a successor 36-month Extended Fund Facility (EFF) and a new Resilience and Sustainability Facility (RSF) program to support Seychelles’ economic policies and reforms. According to the agreement - which is subject to approval by the IMF Executive Board - Seychelles will have access to SDR 42.36 million (about USD 56.96 million) under the EFF and SDR 34.35 million (about USD 46.19 million) under the RSF.
Since introducing the Seychelles International Business Companies Act in 1994, over 200,000 companies have been registered and new offshore companies continue to register each month. Seychelles is at the forefront of the "blue economy" movement focused on using oceans for economic growth, and improved livelihoods and jobs while maintaining the ocean's ecosystem. Since 2012, more intense structural reforms have been implemented, focusing on fiscal reform, the restructuring of state companies and financial system regulations.

Seychelles has the highest per capita GDP in Africa (estimated at USD 39,662 in 2023 by the IMF), is classified as an upper-middle income country and currently has the highest literacy rate and the best healthcare system in the East Africa region. As per the National Bureau of Statistics, in Q4/2022 the average number of employed persons for all sectors was 54,298 and average earnings were SCR 15,169. This represented an increase of (8.4%) in employment numbers and (1%) in average earnings compared to the same quarter one year earlier. Nevertheless, a 2020 study by the National Bureau of Statistics found that 12% of the population is multi-dimensionally poor and experiencing deprivation related to the standard of living, education, health and employment. Given the limitations on land, labour and the fragile environment, economic growth will have to rely on increases in productivity in the medium term.

Main Sectors of Industry

Due to its location and small size, Seychelles has limited land resources for agriculture, with only about 3% of its total land area suitable for cultivation. The agricultural sector in Seychelles contributes around 2.1% to the country's GDP and employs about 2% of the labour force (World Bank, latest data available). The sector mainly focuses on the production of crops such as coconuts, vanilla, cinnamon, fruits, and vegetables, as well as livestock farming, including poultry and pig farming. Coconut farming is the most important agricultural activity in Seychelles and accounts for over 90% of the country's agricultural production. Coconut trees are grown for their meat, oil, and other by-products such as coconut milk and desiccated coconut. Vanilla is another important crop, accounting for about 5% of the country's agricultural production. Fruit and vegetable production is mainly focused on meeting domestic demand, whereas livestock farming mainly consists of small-scale poultry and pig farming.

The industrial sector in Seychelles is relatively small and contributes around 13% to the country's GDP. The sector is primarily focused on the processing of local raw materials and the production of goods for domestic consumption. The manufacturing sector in Seychelles is mainly centred around food processing, which includes fish canning, meat processing, and the production of baked goods, confectionery, and beverages. The sector also includes the production of textiles, garments, and footwear, as well as the manufacturing of construction materials such as cement, bricks, and tiles. Overall, the manufacturing sector is estimated to account for 5% of GDP. According to the latest figures by the National Bureau of Statistics, industrial production in the fourth quarter of 2022 decreased by 21.6% compared to the third quarter.

The services sector in Seychelles is the largest contributor to the country's economy, accounting for around 67.2% of its GDP. The sector is diverse and includes a range of activities such as tourism, financial services, trade, transport, and communications. Tourism is one of the most important sectors within the services industry and contributes significantly to its foreign exchange earnings, providing employment opportunities for a large segment of the population. After suffering due to the COVID-19 pandemic, the sector recovered in 2022, when the country welcomed 334,552 tourists, up by 81% compared to the previous year. The financial services sector in Seychelles is also an important contributor to the country's economy as Seychelles has established itself as an offshore financial centre, offering a range of services such as banking, insurance, and investment management. Trade and transport are other important sub-sectors within the services industry in Seychelles. The country's strategic location in the Indian Ocean has made it an important transit point for goods moving between Africa, Asia, and the Middle East.

 

Breakdown of Economic Activity By Sector	Agriculture	Industry	Services
Value Added (in % of GDP)	2.9	13.5	66.3
Value Added (Annual % Change)	3.8	3.5	10.2

Source: World Bank - Latest available data.

 

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Monetary Indicators	2016	2017	2018	2019	2020
Seychelles Rupee (SCR) - Average Annual Exchange Rate For 1 MUR	0.37	0.40	0.41	0.39	0.45

Source: World Bank - Latest available data.

 

 

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Indicator of Economic Freedom

Definition

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.

Score:

66,3/100

World Rank:

60

Regional Rank:

4

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

 

Foreign Trade in Figures

The Archipelago of Seychelles is very open to trade, with a trade-to-GDP ratio of 153% (World Bank, latest data available). The country is a member of COMESA (the Common Market of East and South Africa) and of the WTO since 2015. Customs duties remain comparatively high in Seychelles, especially in the fishing sector. In addition, while the country does not have major trade barriers, the lack of infrastructure also remains an important obstacle to trade. The government has acted to encourage foreign trade, including tax incentives for the tourism industry and the reduction of customs procedures at ports. To consult the list of trade agreements, refer to the website of the Seychelles Trade Portal. Almost 85% of exports are made of prepared or preserved fish, followed by ships (2.5%) and petroleum oils (2.1%); while the country mostly imports machinery (8.8%), electrical machinery (8.7%), fish (6.7%), ships (5.7%), and mineral fuels (5.4% - data ITC 2021).

Seychelles’ largest clients are France (21.7% of total exports), Japan (11.4%), the United Kingdom (10.2%), Mauritius (9.4%), Italy (6.4%), and Spain (5.8%); whereas its main suppliers are the United Arab Emirates (14.6% of total imports), Spain (10.8%), China (9.2%), South Africa (7.9%), and France (7.1% - ITC 2021).
 
The country has a structural trade deficit, and the trend is expected to continue in future years. According to WTO, exports of goods stood at USD 464 million (an increase of 7.4% year-on-year) in 2021, against USD 1.1 billion of imports (+12.8 y-o-y%). Concerning services, the country is a net exporter thanks to its tourism activities: in 2021, exports totalled USD 892 billion against USD 476 million in imports. Data from the World Bank shows that in 2021 the archipelago’s trade deficit stood at 8.1% of its GDP (up from 5.2% recorded one year earlier). Preliminary data from the National Bureau of Statistics show that in 2022, domestic exports were valued at SCR 5,4 billion (6.5% higher than in 2020), whereas imports stood at SCR 4,568.1 million (-15.6% vis-à-vis one year earlier, of which 87.7% comprised canned tuna), whereas imports stood at SCR 19,456 billion (+2.6%).

Sources of General Economic Information

Ministries

Ministry of Finance, National Planning and Trade
Ministry of Foreign Affairs and Tourism

Statistical Office

National Bureau of Statistics

Central Bank

Central Bank of Seychelles

Stock Exchange

MERJ Exchange

Search Engines

Economic Portals

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