Seychelles is an archipelagic nation of 115 islands located off the eastern coast of Africa in the Indian Ocean. The majority of the country’s 99,258 inhabitants live on the three most-populated islands of Mahé, Praslin, and La Digue. Seychelles gained its independence from the United Kingdom in 1976, at which time the population lived at near subsistence level. With a GDP of $1.45 billion in 2021, Seychelles has the highest GDP per capita in Africa at $14,653. Although the World Bank has designated Seychelles as a high-income country since 2015, the country’s wealth is not evenly distributed. According to the United Nations Development Program’s Human Development Report for 2021/2022, the richest one percent, and the richest 10 percent of Seychellois hold 20.6 percent and 23.9 percent of the total income respectively, while the poorest 40 percent of the population hold 19.6 percent of the total income. Seychelles’ main economic activities are tourism and fishing, and the country aspires to be a financial hub.
Seychelles experienced a coup d’état in 1977, just a year after independence, which brought to power a one-party socialist government. Multiparty democracy was restored in 1993 after the adoption of a new constitution, but the United Seychelles Party (USP) continued to hold power until October 2020, when the opposition coalition Seychellois Democratic Union (Linyon Demokratik Seselwa, or LDS) won both the presidential and legislative elections. This opposition victory ushered in the first democratic transition of power in the country’s history. LDS holds 25 of the 35 assembly seats and includes four main parties: the Seychelles National Party (SNP); the Lalyans Seselwa (Seychellois Alliance); the Seychelles Party for Social Justice and Democracy (SPSD); and the Seychelles United Party (SUP). The former ruling United Seychelles party (US) currently holds 10 seats in the National Assembly. The next presidential and legislative elections will be held in 2025.
Heavy reliance on the tourism industry makes the overall economy vulnerable to external shocks, such as the COVID-19 pandemic. In January 2021, the Central Bank of Seychelles (CBS) announced that January to November 2020 tourism revenues decreased by 78 percent. Tourism-related contributions to GDP fell from 22.3 percent in 2019 to 15.5 percent in 2020, per the National Bureau of Statistics. The CBS estimated that the economy contracted 11.3 percent in 2020 compared to 3 percent growth in 2019.
Following the reopening of borders in March 2021, tourism in Seychelles gradually picked up, with the country registering a total of 182,849 tourist arrivals for the January to December 2021 period, compared to 114,858 visitors for the same period in 2020 and 384,224 visitors in 2019. The number of visitors maintained a positive trajectory through 2022, with 332,068 tourists visiting. Large inflows of tourists came from Israel, UAE, and Russia in 2020 and 2021. Russia’s invasion of Ukraine temporarily hampered tourist arrivals, although this was more than offset by the increase in tourists’ arrivals from traditional western European markets.
According to the IMF, real GDP grew by 6.9 percent in 2021, compared to a decline of 12.9 percent in 2020. The Seychelles National Bureau of Statistics reported a year-on-year percentage increase of 14 percent in real GDP for the third quarter of 2022 as compared to the same quarter in 2021. The main sectoral drivers of this increase were information and communication, construction, administrative and support services, professional, scientific, and technical activities, transportation and storage, and public administration. The IMF forecasted real GDP growth to reach 10.6 percent in 2022, before moderating to 5.4 percent in 2023.
In 2019, the government was on track to reduce the debt-to-GDP ratio to 50 percent by the end of 2021. According to the Ministry of Finance, however, by the end of 2020 the debt-to-GDP ratio had spiked to 99.4 percent. As was the case during the global economic crisis in 2008, the government turned to the IMF for support. In July 2021, Seychelles’s authorities and the IMF reached an agreement on economic and structural policies that would be supported by $107 million under the Extended Fund Facility (EFF) for the duration of 28 months. Seychelles’s authorities and the IMF agreed to reduce fiscal and debt vulnerabilities while promoting economic growth and protecting the environment and the most vulnerable segments of the population. Governance and transparency commitments included the completion of an audit of COVID-19 emergency spending and related procurement, and improvements in the AML/CFT regime.
In July 2022, the IMF assessed that the Government of Seychelles had made impressive progress in implementing the IMF-supported program and restoring macroeconomic balances. It highlighted that the country’s economic recovery has outperformed expectations, fueled by a strong rebound in tourism and significant fiscal overperformance. Per the Ministry of Finance, by December 2022, the total government and government guaranteed debt represented about 65 percent of GDP, compared to 74 percent as of December 2021, upturning projections in July 2022 that debt would decrease at a slower pace in 2022 due to spillovers of the war in Ukraine. Per the Central Bank of Seychelles, year-on-year inflation as of January 2023 was estimated at 2.4 percent compared to 3.9 percent in January 2022. However, the IMF expects inflation to rise to 4.5 percent in 2023, as a reflection of external factors such as higher import prices. In March 2023, the government announced that it planned to start negotiations for a new Extended Fund Facility (EFF) with the IMF.
Despite the government’s attempts to diversify the economy, activity remained focused on fishing and tourism. However, Seychelles’ Exclusive Economic Zone (EEZ), which spans 1.3 million square kilometers, is a potential source of untapped oil reserves and represents potential business opportunities for U.S. companies. In September 2022, the Government of Seychelles and Petro Seychelles Ltd. signed an agreement with an oil exploration company based in Canada, for oil exploration and extraction on the southern shelf, 50 miles southeast of the main island, Mahé. 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 natural environment. The government planned to reduce overall greenhouse gas emissions by 26.4 percent of the business-as-usual scenario 2030 value by undertaking reforms in its energy, refrigeration and air conditioning, transport, and waste sectors. Authorities planned to use solar and wind energy to increase the share of renewable energy production from 5 to 15 percent by 2030. While Seychelles welcomes foreign investment though the Seychelles Investment Act, 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 increases to productivity levels, but stress that these changes must be implemented in an environmentally sound and sustainable manner. 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.
|TI Corruption Perceptions Index||2022||23 of 180||http://www.transparency.org/research/cpi/overview|
|Global Innovation Index||2022||N/A||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country ($M USD, historical stock positions)||2021||USD 599||https://apps.bea.gov/international/factsheet|
|World Bank GNI per capita||2021||USD 14,540||http://data.worldbank.org/indicator/NY.GNP.PCAP.CD|