On June 2, 2017, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation [1] with Seychelles.
Macroeconomic performance continued to be strong in 2016. Economic growth reached 4½ percent, reflecting increased tourist arrivals, stronger output in the fishing industry, and expanding credit to the private sector. Helped by low commodity prices and a stable exchange rate, inflation (year-on-year) was negative throughout early 2017. The external current account deficit remained largely unchanged, while gross international reserves at end-2016 reached 4 months of prospective imports of goods and services. Supported by lower than budgeted capital outlays and strong tax revenue growth, the 2016 primary fiscal surplus reached 3.4 percent of GDP, exceeding the target by 0.4 percent.
With continued foreign investments and rising arrivals in the tourism sector, the growth outlook for 2017 remains positive. The rising trend in international fuel prices since late 2016, along with fiscal measures in the 2017 budget, could put pressure on inflation and on the balance of payments. International reserves are expected to remain at an adequate level, anchored by strong macroeconomic policies. Downside risks to the outlook stem largely from the external sector.
Executive Board Assessment [2]
Executive Directors commended the authorities for making considerable progress toward macroeconomic stability under successive Fund‑supported programs. While the growth outlook is favorable, the economy remains vulnerable to internal and external risks, including in the long run to climate change. Directors called for continued commitment to prudent policies and structural reforms to safeguard the gains thus far and promote sustainable and inclusive growth. In this regard, they noted the authorities’ intention for continued engagement with the Fund.
Directors encouraged the authorities to achieve their medium‑term debt target to preserve the macroeconomic stability gained through bold reforms implemented since the 2008 crisis. They noted that additional, permanent measures will be needed to meet the authorities’ target of bringing the public debt below 50 percent of GDP and to mitigate pressures on the country’s external position. Directors welcomed the progress made toward improving public finance management and strengthening the state‑owned‑enterprise sector.
Directors highlighted the need to create further fiscal space over the medium term to accommodate priority investments to enhance resilience to climate change. In this regard, they called for efforts to boost revenue further and shift spending composition from current to capital expenditure over the medium term.
Directors supported the current monetary policy stance but advised the central bank to remain vigilant to inflationary pressures and further tighten policy if necessary. They noted that the flexible exchange rate policy has served the country well and advised the central bank to minimize intervention to keep reserve coverage broadly at the current level. They welcomed the progress made toward adopting a stronger monetary policy framework.
Directors supported continued efforts to reduce the financial sector risks and avoid further loss of corresponding banking relationships. They encouraged the authorities to move forward with a comprehensive strategy to strengthen the AML/CFT framework, aligning it with international standards.
Directors concurred that further structural reforms are important to promote economic diversification. They emphasized the need for measures to improve the business environment, including reducing cross‑subsidies in electricity prices, using efficiently public‑private‑partnerships in infrastructure building, and addressing skills mismatch in the labor market.
Seychelles: Selected Economic and Financial Indicators, 2014-22
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Main products and exports: Tourism, Canned Tuna |
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2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
2021 |
2022 |
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|
Est. |
Est. |
Proj. |
Proj. |
Proj. |
Proj. |
Proj. |
Proj. |
Proj. |
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|
National income and prices |
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Nominal GDP (millions of Seychelles rupees) |
17,119 |
18,336 |
19,033 |
20,022 |
21,259 |
22,539 |
23,969 |
25,498 |
27,123 |
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|
Real GDP |
4.5 |
5.0 |
4.5 |
4.1 |
3.4 |
3.3 |
3.3 |
3.3 |
3.3 |
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|
CPI (annual average) |
1.4 |
4.0 |
-1.0 |
1.8 |
2.7 |
2.7 |
3.0 |
3.0 |
3.0 |
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|
CPI (end-of-period) |
0.5 |
3.2 |
-0.2 |
2.8 |
2.3 |
3.0 |
3.1 |
3.0 |
3.0 |
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|
GDP deflator average |
2.3 |
2.0 |
-0.7 |
1.1 |
2.7 |
2.7 |
3.0 |
3.0 |
3.0 |
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|
Money and credit |
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|
Broad money |
26.6 |
2.9 |
12.1 |
5.2 |
… |
… |
… |
… |
… |
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|
Reserve money (end-of-period) |
13.9 |
9.5 |
14.5 |
3.9 |
… |
… |
… |
… |
… |
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|
Reserve money (average of last quarter) |
-14.5 |
7.2 |
12.6 |
1.9 |
… |
… |
… |
… |
… |
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|
Velocity (GDP/broad money) |
1.4 |
1.5 |
1.4 |
1.4 |
… |
… |
… |
… |
… |
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|
Money multiplier (broad money/reserve money) |
5.0 |
4.7 |
4.6 |
4.6 |
… |
… |
… |
… |
… |
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|
Credit to the private sector |
26.2 |
7.8 |
10.3 |
10.4 |
… |
… |
… |
… |
… |
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|
Savings-Investment balance |
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|
External savings |
23.1 |
18.6 |
18.4 |
16.4 |
15.9 |
16.8 |
17.4 |
18.3 |
17.8 |
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|
Gross national savings |
14.6 |
15.2 |
11.8 |
15.9 |
15.8 |
14.8 |
15.9 |
14.8 |
16.5 |
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|
Of which : government savings |
6.9 |
5.9 |
3.8 |
5.2 |
5.6 |
6.4 |
8.3 |
8.9 |
9.4 |
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|
private savings |
7.6 |
9.3 |
8.1 |
10.7 |
10.2 |
8.4 |
7.6 |
6.0 |
7.1 |
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|
Gross investment |
37.7 |
33.8 |
30.2 |
32.2 |
31.7 |
31.6 |
33.3 |
33.1 |
34.3 |
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|
Of which : public investment 1 |
6.7 |
4.8 |
5.0 |
8.3 |
7.7 |
7.4 |
8.2 |
7.6 |
7.8 |
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|
private investment |
31.0 |
29.0 |
25.2 |
23.9 |
24.0 |
24.2 |
25.1 |
25.5 |
26.5 |
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|
private consumption |
50.8 |
47.6 |
47.0 |
44.3 |
47.0 |
48.7 |
50.0 |
52.3 |
51.7 |
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|
Government budget |
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|
Total revenue, excluding grants |
34.3 |
33.4 |
36.6 |
37.6 |
36.9 |
36.9 |
37.0 |
37.2 |
37.2 |
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|
Expenditure and net lending |
34.6 |
32.8 |
38.1 |
41.9 |
40.5 |
39.4 |
37.8 |
37.4 |
37.0 |
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|
Current expenditure |
28.0 |
28.0 |
33.1 |
33.5 |
32.8 |
32.0 |
31.1 |
30.2 |
29.5 |
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|
Capital expenditure 1 |
6.6 |
4.8 |
5.0 |
8.3 |
7.7 |
7.4 |
8.2 |
7.6 |
7.8 |
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|
Overall balance, including grants |
2.1 |
0.9 |
-1.4 |
-1.1 |
-0.9 |
-0.4 |
-0.1 |
0.5 |
0.9 |
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|
Program primary balance |
4.9 |
4.3 |
3.4 |
3.0 |
3.0 |
3.0 |
3.0 |
3.0 |
3.0 |
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|
Total government and government-guaranteed debt 2 |
70.8 |
69.3 |
71.2 |
69.3 |
62.6 |
55.9 |
49.7 |
45.6 |
41.4 |
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|
Domestic (including debt issued for monetary purposes) |
33.5 |
34.8 |
40.2 |
38.9 |
33.5 |
28.7 |
23.4 |
20.9 |
18.0 |
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|
Domestic (excluding debt issued for monetary purposes) |
22.5 |
21.4 |
24.1 |
23.5 |
21.2 |
20.0 |
17.7 |
16.3 |
14.4 |
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|
External |
37.3 |
34.5 |
31.0 |
30.4 |
29.0 |
27.2 |
26.3 |
24.6 |
23.4 |
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|
External sector |
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|
Current account balance including official transfers |
-23.1 |
-18.6 |
-18.4 |
-16.4 |
-15.9 |
-16.8 |
-17.4 |
-18.3 |
-17.8 |
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|
Total external debt outstanding (millions of U.S. dollars) 3 |
1,588 |
1,361 |
1,393 |
1,485 |
1,544 |
1,591 |
1,657 |
1,725 |
1,790 |
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|
(percent of GDP) |
118.2 |
98.8 |
97.5 |
101.2 |
99.8 |
97.2 |
95.5 |
94.4 |
93.5 |
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|
Terms of trade (-=deterioration) |
-0.3 |
1.9 |
2.7 |
-1.4 |
-0.1 |
-0.1 |
-0.1 |
-0.2 |
0.0 |
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|
Real effective exchange rate (average, percent change) |
-3.2 |
11.5 |
... |
... |
... |
... |
... |
... |
... |
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|
Gross official reserves (end of year, millions of U.S. dollars) |
463 |
537 |
523 |
492 |
491 |
512 |
534 |
541 |
556 |
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|
Months of imports, c.i.f. |
3.9 |
4.3 |
4.0 |
3.6 |
3.5 |
3.5 |
3.4 |
3.3 |
3.3 |
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|
Exchange rate |
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|
Seychelles rupees per US$1 (end-of-period) |
14.0 |
13.2 |
… |
… |
… |
… |
… |
… |
… |
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|
Seychelles rupees per US$1 (period average) |
12.7 |
13.3 |
… |
… |
… |
… |
… |
… |
… |
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|
Sources: Central Bank of Seychelles; Ministry of Finance; and IMF staff estimates and projections. |
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1 Includes onlending to the parastatals for investment purposes. 2 Includes debt issued by the Ministry of Finance for monetary purposes. The domestic debt has increased since the third review due to the Paris Club buy-back which replaces external with domestic debt, as well as a revision to the data to include domestic guarantees. In addition, the lower primary deficit and higher interest payments for 2016 and the statistical discrepancy in 2015 and H1 2016 have increased the debt. 3 Includes private external debt. |
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[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
[2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.imf.org/external/np/sec/misc/qualifiers.htm .
