Seychelles economy looks strong, but rupee set to weaken slightly


Mr Gable addressing delegates at the One Africa conference at the Constance Ephelia Resort last week

Jeff Gable is responsible for the macroeconomic and market strategy view for South Africa and Sub Saharan Africa across Absa and Barclays Groups. He presented his research findings at the Barclays’ One Africa conference held last week at the Constance Ephelia resort.

“Our core forecast would probably be to see some modest rupee weakening against the major currencies in the periods ahead. That would be most evident against the US dollar, because we believe that the dollar will strengthen against the euro, the sterling and many others, so that might hide some of the rupee-euro movement,” said Mr Gable.

“When we make exchange rate forecasts, and I’ll be a little bit flippant here, the only thing we know with certainty when we make a 12-month forecast is that people love precision and we know it’s going to be wrong,” he said, to the accompaniment of knowing laughter from his colleagues.

“But we believe it will be somewhat weaker rather than stronger, and we believe that the weakness is rather to be modest and not crisis-driven or substantial.”

With regard to the rupee’s exchange rate against the euro, Mr Gable said the forecast was flat to slightly weaker against the euro and would not be as pronounced as the weakness against the dollar.

According to the economist, Seychelles experienced “uncomfortable” levels of inflation last year, but said it has decreased to some extent and looked set to continue decreasing for the last half of this year. He also indicated that the forecasted dip in global crude oil prices and stronger rupee was positive for the overall inflation outlook.

As Seychelles is a small island economy very dependent on importing oil, food and other products, Mr Gable said the local economy remained very vulnerable to global market events, and explained that this places Seychelles at high risk as the country pays its import bill largely from income generated by tourism. 

Mr Gable said that tourist arrivals to Seychelles went up by about seven percent last year, and in a global context, it meant that Seychelles tourism was growing twice as fast as global tourism, with significant increases from emerging tourist regions such as Russia, Africa, Asia and the UAE.

“If you like regional competition like we Canadians do, if you think about Seychelles in competition with Mauritius, which is a country about ten times the size of Seychelles, Mauritian tourism went up only one percent last year.”