Seychelles is an island nation located off the eastern coast of Africa in the Indian Ocean with a population of 98,462. Seychelles gained its independence from the United Kingdom in 1976, at which time the population lived at near subsistence level. Today, Seychelles’ main economic activities are tourism and fishing, and the country aspires to be a financial hub. Although the World Bank designated Seychelles as a “high income” country in 2015, its wealth is not evenly distributed. According to the United Nations Development Program’s (UNDP) Human Development Report for 2020, the share of income held by the richest 10 percent in Seychelles amounts to 40 percent.
Seychelles experienced a socialist takeover in 1977, which resulted in a centrally planned economy and, in the short term, rapid economic development. However, serious imbalances such as large deficits and mounting debt contributed to persistent foreign exchange shortages and slow growth that plagued Seychelles through the first decade of the 21st century. After defaulting on interest payments due on a $230 million bond in 2008, the Government of Seychelles turned to the International Monetary Fund (IMF) for support. To meet the IMF’s conditions for a stand-by loan, the government implemented a program of reforms, including a liberalization of the exchange rate regime, devaluing and floating the Seychellois Rupee (SCR), and eliminating all foreign exchange controls. As a result, the country experienced economic growth, lower inflation, a stabilized exchange rate, declining public debt, and increased international reserves, until the COVID-19 global pandemic in 2020.
Drivers of economic growth include fisheries, tourism, and construction. Heavy reliance on the tourism industry, which directly and indirectly contributed to over 60 percent of GDP in 2019, made the overall economy vulnerable to external shocks, such as the COVID-19 global pandemic. In January 2021, the Central Bank of Seychelles (CBS) announced that January – November 2020 tourism revenues decreased by 78 percent. According to the CBS, the economy is estimated to have contracted by 11.3 percent in 2020 compared to 3.0 percent growth in 2019. The IMF forecasts that real GDP will increase by 4.2 percent in 2021. In 2019, the government was on track to reduce the debt-to-GDP ratio to 50 percent by the end of 2021; however, by the end of 2020, the debt-to-GDP ratio had spiked to 99.4 percent, according to the Ministry of Finance. By the end of 2021, the Ministry of Finance expected public debt to increase to 108.4 percent of GDP, prompting the government to re-engage with the IMF on reform negotiations. Despite the government’s attempts to diversify the economy, it remains focused on fishing and tourism. Seychelles’ vast Exclusive Economic Zone (EEZ), which spans 1.3 million square kilometers of the western Indian Ocean, is a potential source of untapped oil reserves and represents potential business opportunities for U.S. companies. Seychelles also has a small but growing offshore financial sector. There is also potential for U.S. investment in renewable energy as Seychelles seeks to reduce its heavy dependence on imported fossil fuels while preserving its naturally beautiful environment.
Seychelles welcomes foreign investment though the Seychelles Investment Act, and related regulations restrict foreign investment in a number of sectors where local businesses are active, including artisanal fishing, small boat charters, taxi driving, and scuba diving instruction. The country’s investment policies encourage the development of Seychelles’ natural resources, improvements in infrastructure, and an increase in productivity levels, but stress that this must be done in an environmentally sound and sustainable manner. Indeed, Seychelles puts a premium on maintaining its unique ecosystems and screens all potential investment projects to ensure that any economic, social, or industrial benefits will not compromise the country’s international reputation for environmental stewardship.
Politically, Seychelles’ first multiparty presidential election was held in 1993, after the adoption of a new constitution. In October 2020 elections deemed peaceful, orderly, and transparent by international election observers, opposition coalition party Linyon Demokratik Seselwa (LDS) won both the presidential and legislative elections. LDS holds 25 of the 35 assembly seats and includes four main parties: the Seychelles National Party (SNP); Lalyans Seselwa (Seychellois Alliance); the Seychelles Party for Social Justice and Democracy (SPSD) and; the Seychelles United Party (SUP). For the first time since the return of multiparty elections in 1993, United Seychelles Party (USP) is not the ruling party and currently holds 10 seats in the National Assembly. Prior to 1993, the United Seychelles Party (formerly the People’s Party/Parti Lepep) was the sole legal party in Seychelles. The next presidential and legislative elections will be held in 2025.
|TI Corruption Perceptions Index||2020||27 of 180||http://www.transparency.org/research/cpi/overview|
|World Bank’s Doing Business Report||2020||100 of 190||http://www.doingbusiness.org/en/rankings|
|Global Innovation Index||2020||NA||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country ($M USD, historical stock positions)||2019||325||https://apps.bea.gov/international/factsheet/|
|World Bank GNI per capita||2019||$16,900||http://data.worldbank.org/indicator/NY.GNP.PCAP.CD|