The Republic of Seychelles is an archipelago of 115 islands northeast of Madagascar. The country has a total population of 121,355 people, three-quarters of whom live on the main island of Mahé. Seychelles has Africa's highest gross domestic product (GDP) per capita, at $16.7 billion (2023). Its economy is highly dependent on tourism and fisheries, and climate change poses long-term sustainability risks.
Political Context
Independent since 1976, Seychelles is a relatively young democracy. The first multiparty presidential election was held in 1993 after adopting 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 Seselwa party also won the most seats in the national parliament. With well-established democratic institutions, Seychelles' political environment is expected to remain stable. The next general election will take place in September 2025.
Economic Developments and Outlook
Seychelles is the most prosperous nation in Sub-Saharan Africa. The economy remains highly dependent on tourism, with earnings from the industry accounting for 46.2% of GDP and 42% of exports, making it highly vulnerable to external shocks. The fisheries sector is the second pillar of the economy, with growing investor interest in the blue economy sector.
Growth is estimated at 3.2% in 2023, with services contributing 2.7 percentage points. Tourist arrivals in 2023 increased by 5.7% but remained 9% below pre-pandemic levels. The telecommunications sector grew by 15%, reflecting improved service offerings while new hotel and resort projects, along with renovations, spurred a 7% growth in the construction sector. Public sector salaries were revised up in 2023, increasing total average earnings by 4.6%, compared to the 0.1% growth in 2022. The continued recovery in tourism contributed to an increase in annual average employment by 2.2%, following growth of 8.1% in 2022.
Prices declined in 2023 due to exchange rate appreciation, with headline inflation averaging -1.0%. By mid-2024 core inflation remained negative at -0.9% yet headline inflation increased to 0.4% due to utility tariff hikes and higher freight costs associated with the Red Sea crisis. Consequently, falling prices prompted the Central Bank to reduce its monetary policy rate from 2.0% to 1.75% in April 2024 to support economic growth.
The Seychelles government remains committed to fiscal prudence after successive consolidation efforts implemented since 2021. Public debt is on a sustainable path and has declined to 58.3% of GDP in 2023. The current account deficit narrowed to an estimated 7.2% of GDP in 2023 which is primarily financed by foreign direct investments, equivalent to 13.2% of GDP, primarily from investments in hotels and resorts. The country’s foreign exchange reserves increased to $682 million in 2023, equivalent to 3.8 months of imports.
Development Challenges
Despite its high-income status, Seychelles faces some development challenges centered on enhancing productivity and boosting overall economic performance to foster greater shared prosperity. The island state faces growing vulnerabilities due to limited economic diversification, insularity, small size, remoteness, susceptibility to climate shocks, and exposure to external shocks, including fluctuations in international travel and the prices of essential imports like food and fuel. Although it has the highest GDP per capita in the region, addressing labor and skills shortages and boosting social protection are key elements to improve human capital development. Despite a low unemployment rate of 3.2% and significant strides in reducing extreme poverty, 25.3% of the population are estimated to live below the national poverty line. Institutional barriers—such as inefficiencies in public sector management, challenges in starting and operating businesses, and limited access to quality education and skills development—further constrain progress.
Frequent disasters triggered by monsoon rains, floods, and landslides, compounded by events like the December 2023 explosion in an industrial area on Mahé island, underscore the need for climate adaptation and funding as well as enhancements in disaster risk management. In the near term, priorities include maintaining debt sustainability and reforming the social protection system to support the most vulnerable. In the medium term, the focus is to increase revenues, boost capital expenditures for climate change adaptation, and create fiscal space through prudent expenditure management and stronger revenue mobilization. Additionally, structural reforms in revenue administration, public financial management, and governance—alongside digitalization and state-owned enterprise reforms—are essential to Seychelles’ sustainable development.
Last Updated: Oct 21, 2024
