‘Seychelles’ economy remains resilient in the face of global downside risks’


Real GDP growth is forecasted at 2.7% and although slower than 5.0% recorded in 2011, it remained an encouraging outcome in consideration of uncertainties in the world economic environment.  This particularly relates to the on-going crisis in Europe, which is an important trade partner for Seychelles.

Europe remains the main supplier of visitors to the country regardless of the significant reduction in tourists from France, UK & Eire, and Italy given the notable increase in tourists from other European countries such as Germany.  This is notwithstanding the Eurozone debt crisis and the non-availability of direct flights to Europe previously being offered by Air Seychelles.

By mid-December 2012, the number of tourists to the country was 7% higher than for the same period of 2011, representing a new record.  The sector’s annual direct contribution to foreign exchange inflows is estimated at US $305 million, 4.9% higher than in 2011.  In addition to being a key foreign exchange earner, the tourism sector is also an important source of employment and contributor to the country’s overall output or GDP.

According to trade statistics, the demand for imports remained on the high side despite a reduction in the number of foreign direct investment projects being implemented.  However, the total demand for foreign exchange reported by commercial banks and bureau de change – which is an indication of foreign exchange outflows – has thus far been lower than in the previous year.

Nonetheless, a prominent depreciation of the domestic currency has been observed in the first half of the year.  This was from an annual average of R12.38 against the US dollar in 2011 to R15 in July.  In late July and early August, the Central Bank intervened by selling foreign exchange in the market.  Since then, the domestic currency has stabilised at around R13 against the US dollar, a development which has also been supported by the relative stability of the euro against other major currencies in the international markets.

Exchange rates

Given Seychelles’ heavy reliance on imports, the economy remains highly vulnerable to international price shocks.  During 2012, the main sources of the observed inflationary pressures originated from revision in utility prices and that of fuel as well as the second round effects of the depreciation of the domestic currency.  Such development is reflected in the measure of inflation based on the published consumer price index (CPI) compiled by the National Bureau of Statistics. 

The CPI shows an increase in inflationary pressures through to June when year-on-year inflation peaked at 8.9%.  However, inflation gradually subsided in the second half of the year.  This was consistent with the prevailing monetary policy stance which has been tightened further in the second quarter of 2012.  The ease in inflationary pressure was also supported by the stability of the domestic currency.  As at end November 2012, the CPI showed year-on-year and 12-month average inflation rates at 6.2% and 7.1% respectively. 


The country’s gross official reserves is expected to end the year 2012 at around US $300 million representing further accumulation compared to US$279 million in 2011, with the year’s outcome equivalent to just under three months of import cover.  Notable, the accumulation of international reserves is an important objective under the current IMF-supported macroeconomic reform programme.

A positive performance was also observed on the fiscal front during 2012.  A primary surplus of 5.9 per cent of GDP is expected for the year given the over performance in revenue collection and fiscal discipline in government expenditure.  The encouraging fiscal performance has led to further reduction in the level of public debt.  The year 2012 is expected to end with total stock of public debt reduced to 80 per cent of GDP, with external debt projected to reach 51 per cent of GDP.  The government remains on track with its objective to achieve its debt sustainability threshold of 50 per cent of GDP by 2018.

In the absence of major external shock, the Seychelles economy is expected to improve next year on its 2012 performance, with real GDP forecasted to grow by 3.0%.  Assuming stability in the international commodity markets and in the domestic foreign exchange market, inflationary risks are expected to ease further.