The economic context of the Seychelles

Economic Indicators

The Republic of Seychelles is an archipelago of 115 islands, with three-quarters of the population living on the main island of Mahé. The country stands as a high-income nation with the highest GDP per capita in Sub-Saharan Africa, yet remains highly susceptible to external disruptions. Tourism constitutes 31% of GDP and 41% of exports. With over 90% of production inputs imported, the country faces significant exposure to global commodity shocks and pandemics. In 2023, growth slowed to an estimated 3.3% from 8.9% in 2022. This deceleration was influenced by modest upticks in tourism, notably from European markets affected by tight monetary conditions and the conflict in Ukraine. Additionally, geopolitical tensions in Israel impacted tourist arrivals from Asia. The economy is forecasted to expand by 3.5% in 2024, bolstered by tourism and augmented flight seat capacity to the islands (data World Bank). The anticipated addition of 450 new hotel rooms throughout the year is expected to drive up tourism receipts. Nevertheless, sluggish trade and commerce within the Providence industrial zone, stemming from the gradual recovery following a 2023 explosion which caused severe damages, are likely to dampen growth.

Effective macroeconomic management has enabled Seychelles to navigate shocks and sustain growth. Pandemic mitigation measures facilitated a swift recovery and were gradually phased out. Since 2021, the government has pursued fiscal consolidation and implemented measures to enhance economic resilience while addressing external shocks. Investments in climate resilience, primarily financed through concessional funding and supported by private sector initiatives, have been prioritized. Fiscal strategies like the 2023 tourism environmental sustainability levy contribute to funding climate initiatives, with over 4% of the Seychelles' budget allocated to climate resilience efforts. In 2023, the primary fiscal balance stood at 1.4% of GDP, driven by increased revenue, particularly from robust business and property tax collections. Despite higher government spending due to increased public sector wages and the establishment of the Home Care Agency, public debt decreased to 60.1% of GDP, aided by external debt repayments. Capital expenditure allocation was higher than in 2022, yet under-execution of projects led to budget savings. However, following the December 2023 incidents, additional spending beyond planned investments is necessary, expected to elevate public debt to 62% of GDP (data World Bank). Nevertheless, the government remains committed to containing public debt in the medium term and strengthening the government securities market through bond issuance to mitigate refinancing risk. Inflation remained low, prompting the Central Bank of Seychelles to maintain the monetary policy rate at 2%. In 2023, appreciation of the rupee and moderation in global commodity prices contributed to declining domestic prices, with year-end inflation of -2.71%. In the context of low inflation expectations, the monetary authority is expected to maintain the monetary policy rate at 2% in 2024. Since introducing the Seychelles International Business Companies Act in 1994, over 200,000 companies have been registered and new offshore companies continue to register each month. Seychelles is at the forefront of the "blue economy" movement focused on using oceans for economic growth, and improved livelihoods and jobs while maintaining the ocean's ecosystem. In the last decade, more intense structural reforms have been implemented, focusing on fiscal reform, the restructuring of state companies and financial system regulations.

Seychelles has the highest literacy rate and the best healthcare system in the East Africa region. As per the National Bureau of Statistics, in Q4/2023, the average number of employed persons across all sectors was 54,931, with average earnings amounting to SCR 16,710. This reflects a 0.5% rise in employment numbers and a 10.1% increase in average earnings compared to the corresponding quarter in 2022. Despite external shocks, average earnings have risen by 4.8%, while the poverty rate remained stable at 5.9% in 2023 (World Bank). Given the limitations on land, labour and the fragile environment, economic growth will have to rely on increases in productivity in the medium term.

Main Sectors of Industry

Due to its location and small size, Seychelles has limited land resources for agriculture, with only about 3% of its total land area suitable for cultivation. The agricultural sector in Seychelles contributes around 2.9% to the country's GDP and employs about 2% of the labor force (World Bank, latest data available). The sector mainly focuses on the production of crops such as coconuts, vanilla, cinnamon, fruits, and vegetables, as well as livestock farming, including poultry and pig farming. Coconut farming is the most important agricultural activity in Seychelles and accounts for over 90% of the country's agricultural production. Coconut trees are grown for their meat, oil, and other by-products such as coconut milk and desiccated coconut. Vanilla is another important crop, accounting for about 5% of the country's agricultural production. Fruit and vegetable production mainly focus on meeting domestic demand, whereas livestock farming mainly consists of small-scale poultry and pig farming.

The industrial sector in Seychelles is relatively small and contributes around 13.5% to the country's GDP. The sector is primarily focused on the processing of local raw materials and the production of goods for domestic consumption. The manufacturing sector in Seychelles is mainly centered around food processing, which includes fish canning, meat processing, and the production of baked goods, confectionery, and beverages. The sector also includes the production of textiles, garments, and footwear, as well as the manufacturing of construction materials such as cement, bricks, and tiles. Overall, the manufacturing sector is estimated to account for 5% of GDP.

The services sector in Seychelles is the largest contributor to the country's economy, accounting for around 66.3% of its GDP. The sector is diverse and includes a range of activities such as tourism, financial services, trade, transport, and communications. Tourism is one of the most important sectors within the services industry and contributes significantly to its foreign exchange earnings, providing employment opportunities for a large segment of the population. After suffering due to the COVID-19 pandemic, the sector recovered in recent years: according to the figures released by the NBS, 342,303 visitors arrived in Seychelles in 2023, compared to 324,386 for the same period one year earlier. The financial services sector in Seychelles is also an important contributor to the country's economy as Seychelles has established itself as an offshore financial center, offering a range of services such as banking, insurance, and investment management. Trade and transport are other important sub-sectors within the services industry in Seychelles. The country's strategic location in the Indian Ocean has made it an important transit point for goods moving between Africa, Asia, and the Middle East.

 

Breakdown of Economic Activity By Sector	Agriculture	Industry	Services
Value Added (in % of GDP)	2.9	13.5	66.3
Value Added (Annual % Change)	3.8	3.5	10.2

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

Find more information about your business sector on our service Market reports.

 

 

Find out all the exchange rates daily on our service International currency converter.

 

Indicator of Economic Freedom

Definition

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:

66,3/100

World Rank:

60

Regional Rank:

4

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

 

Sources of General Economic Information

Ministries

Ministry of Finance, National Planning and Trade
Ministry of Foreign Affairs and Tourism

Statistical Office

National Bureau of Statistics

Central Bank

Central Bank of Seychelles

Stock Exchange

MERJ Exchange

Economic Portals