Economy of Seychelles - Growth

Growth

Growth slowed in 1998–2001, due to sluggish tourist and tuna sectors. Also, tight controls on exchange rates and the scarcity of foreign exchange have impaired short-term economic prospects. The black market value of the Seychellois rupee is anywhere from two thirds to one half the official exchange rate. The next few years were also a bit slow due to the worldwide economic downturn and the fear of flying brought on by September 11, 2001. More recently though, tourism has roared back at a record pace setting successive records in 2006 and again in 2007 for number of visitors. The increased availability of flights to and from the archipelago due in part to new entrants Emirates and Qatar airlines is also beginning to show. New five star properties and the devaluation of the currency by nearly 33% by the Seychelles Government is having a positive influence on the tourism sector as well. Both at official exchange rates and at purchasing power parity (PPP), Seychelles remains the richest territory in Africa in terms of GDP per capita (US$9,440.095 at real exchange rates and US$17,560.062 at PPP 2008 estimate),

Because of economic contraction (the economy declined by about 2% in 2004 and 2005 and lost another 1.4% in 2006 according to the International Monetary Fund) the country was moving downwards in terms of per capita income. However, the economy bounced back in 2007, growing by 5.3% due in part to record tourism numbers and the booming building and offshore industries. The IMF forecast further growth in 2008 with continuing increase in the GDP per capita.

In October 2008, as tourism and fishing revenue began slowing, the Seychelles defaulted on a $230 million debt. The International Monetary Fund stepped with a two-year, $26 million rescue package. The rescue package came with a few stipulations; The country laid off 1,800 government workers, floated its currency, lifted foreign exchange controls and sold off state assets. At the time, the country's $800 million external foreign debt was equivalent to almost 175 percent of its gross domestic product.

The decision to let the currency trade freely as part of the IMF rescue package means that Seychelles is the smallest country in the world that has a completely independent currency - one that is neither pegged, nor an adopted foreign currency, nor a common currency used within a larger monetary union. When the Seychellois rupee became freely floated on November 3, 2008, its value quickly fell drastically, decreasing from eight per U.S. dollar to 16, effectively doubled the prices of imports.

The rupee traded at an average 19.97 per euro by noon in the capital Victoria, compared with 11.3421 last week, according to Caroline Abel, head of monetary analysis and statistics at the Central Bank of Seychelles. It traded at 15.58 per dollar, from 8.9090, she said. Against the pound, it dropped to 25.02, from 14.3227.

The global recession and piracy in the Indian Ocean hit Seychelles hard in 2009, with the GDP projected to contract by 7.5 percent. However the government exceeded its fiscal targets, with a primary surplus of 13.4% of GDP in the first nine months of 2009 according to the IMF. They report expenditure has been tightly controlled and revenue has held up well despite the difficult economic environment.

In May 2010 an International Monetary Fund mission visited Seychelles and concluded the country is making progress. The head of the mission, Mr. Jean Le Dem, said at the conclusion of the visit:

The economy is recovering from a recession that put real gross domestic product (GDP) to almost a stand in 2009. Real GDP is projected to grow at 4 percent in 2010, reflecting primarily a rebound in tourism earnings. Twelve-month inflation, which was negative during the past few months, is expected to return to about 1 percent by year-end.