SEYCHELLES
Table 1

Key conditions andchallenges
2023

Population, million

0.1GDP, current US$ billion

2.1

GDP per capita, current US$20446.9

International poverty rate ($2.15)

a0.5

Lower middle-income poverty rate ($3.65)
Upper middle-income poverty rate ($6.85)
Gini index

aa1.2

a

6.7
32.1

School enrollment, primary (% gross)

b97.6

b73.4

Total GHG emissions (mtCO2e)

1.0Life expectancy at birth, years

Source: WDI, Macro Poverty Outlook, and official data.
a/ Most recent value (2018), 2017 PPPs.
b/ Most recent WDI value (2021).

Economic growth is expected to reach 3.5
percent in 2024, supported by tourism andthe rebuilding of infrastructure damagedby extreme weather and the blast at an explosives depot in 2023. Despite theseshocks, average earnings have increased by
4.8 percent and the poverty rate remained
stable at 5.9 percent in 2023. The government has prioritized support for vulnerable groups and investments to enhance
climate resilience while maintaining its
commitment to fiscal prudence.

The Seychelles is a high-income country
with the highest GDP per capita in Sub-Saharan Africa but is highly vulnerable to external shocks. Tourism accounts for 31 percent of GDP and 41 percent of exports. Over90 percent of production inputs are imported, making the country highly vulnerable toglobal commodity shocks and pandemics.
In 2020, during the COVID-19 pandemic,
the economy shrunk by 8.5 percent, and thefiscal deficit widened to 16.4 percent of GDP,
while poverty rates based on the upper-middle-income line of US$6.85 per person per
day rose to 8.0 percent. Moreover, the Seychelles is vulnerable to climate shocks. Theheavy rains and the explosion that occurredin December 2023 highlight the country'svulnerability to climate change.
Prudent macroeconomic management hashelped the Seychelles manage shocks andsustain growth. Measures implemented tomitigate the pandemic supported a quick
recovery and were subsequently phased
out. The government has implemented fiscal consolidation since 2021 and has taken
measures to improve the resilience of theeconomy while also addressing the effectof external shocks. Adaptation investments to strengthen climate resilience use
mostly concessional financing, complemented by private sector efforts. Fiscal
measures such as the 2023 tourism environmental sustainability levy help raise resources for climate initiatives, with morethan 4 percent of the Seychelles’ budget allocated to climate resilience.
Further improvements to the business environment and a renewed focus on employment are needed to maintain inclusive
growth. Labor earnings have been central
to reducing poverty, yet labor and skills
shortages and a growing rate of drug andalcohol addiction constrain further advances. Labor shortages were partly addressed through migration, with migrantsrepresenting 22 percent of the working-agepopulation. The 2023 Enterprise Survey indicates that firms identified a low supplyof skilled labor (20 percent of firms) andlimited land (25 percent of firms) as major
obstacles in doing business.

Recent developments
Growth was an estimated 3.3 percent in 2023
compared to 8.9 percent in 2022, driven bymodest increases in tourism, particularly
from key markets in Europe impacted bytight monetary conditions and the war in
Ukraine. Furthermore, geopolitical issues in
Israel affected tourist arrivals from Asia. In
2023Q3, employment decreased by 0.2 percent, while average earnings saw a 4.8 percent increase compared with the same quarter in 2022 due to an upward revision to public sector wages. Heavy rainfall, landslides,
and floods in the north of Mahé island,
coupled with a massive explosion in a key
industrial zone, damaged commercial
buildings, houses, and public infrastructure at the end of 2023. This incident has
impacted growth and increased household

FIGURE 1 Seychelles / Real GDP growth and sectoral
contributions to real GDP growth

FIGURE 2 Seychelles / Actual and projected poverty rates
and real GDP per capita

Percent
10Poverty rate (%)

8642Real GDP per capita (constant LCU)

12300000

10250000

8200000

6150000

4100000

2500000-2Agriculture
Industry
Services
Gross value added at basic prices

-4-6

0

-8-100
2013

2019

2020

2021

2022

2023e

2024f

2025f

2026f

Sources: National Bureau of Statistics and World Bank staff calculations.

2015

2017

2019

1

Apr 242023

2025

International poverty rate

Lower middle-income pov. rate

Upper middle-income pov. rate

Real GDP pc

Source: World Bank. Notes: see Table 2.

MPO

2021

vulnerability. Consequently, the government has provided support to households
and businesses to rebuild and re-occupy
their premises.
Inflation remained low, prompting the Central Bank of Seychelles to maintain the monetary policy rate at 2 percent. In 2023, appreciation of the rupee and moderation in global commodity prices contributed to declining domestic prices, with year-end inflationof -2.71 percent. The primary fiscal balance
was 1.4 percent of GDP, as revenue increased, led by strong business and property tax collections, despite higher government expenditure due to higher public sector wages and the establishment of theHome Care Agency. Although the budget
allocated to capital expenditure was higher
than in 2022, project under-execution of 32
percent resulted in budget savings. Public
debt declined to 60.1 percent of GDP due torepayments of external debt. The current account deficit narrowed to an estimated at 5.6
percent of GDP. The deficit is financed byforeign direct investments, equivalent to13.8 percent of GDP, primarily from investments in hotels and resorts. Foreign exchange reserves increased to US$681 million
in 2023, covering 3.8 months of imports.

Outlook
The economy is expected to grow by 3.5
percent in 2024, supported by tourism
and increases in flight seat capacity tothe islands. Additionally, with 450 new
hotel rooms expected to become available during the year, tourism receipts
are projected to increase. However,weak trade and commerce within theProvidence industrial zone due to thegradual recovery from last year’s explosion are expected to weigh on growth.
Fiscal measures and reconstruction efforts to restore businesses’ operationality by end-2024 are expected to support
the economic recovery beyond 2024.
Following the December incidents, thegovernment’s priorities are to support
vulnerable groups whose homes weredamaged and to invest in strengthening
resilience to climate events, including
building and maintaining structures likebridges, watersheds, canals, retaining
walls, and coastal blockades. Additional
spending beyond already planned investments is needed to rebuild better.

TABLE 2 Seychelles / Macro poverty outlook indicators

This is expected to contribute to an increase in public debt to 62 percent ofGDP. However, the government remains
committed to containing public debt in
the medium term and developing thegovernment securities market by issuingbonds to reduce refinancing risk. In thecontext of low inflation expectations, themonetary authority is expected to maintain the monetary policy rate at 2 percent in 2024. More robust tourism earnings are expected to contribute to a stable rupee, even though the current account deficit is projected to widen as
imports increase for consumption andreconstruction efforts.
The country’s reliance on the European
tourist market is a risk, and delays in
the opening of new and renovated hotels could also result in a lower-than-expected yield from tourism in 2024. Additionally, attacks on commercial vessels in the Red Sea could increase inflation through higher import prices,which may disproportionally affect thepoor. Lastly, climate shocks pose a significant risk, underscoring the importance of sustainable growth and poverty
reduction strategies.

(annual percent change unless indicated otherwise)

Real GDP growth, at constant market prices
Private consumption
Government consumption
Gross fixed capital investment
Exports, goods and services
Imports, goods and services

2021
2.5
1.3
4.3
0.4
6.2
4.7

2022
8.9
6.6
2.5
2.7
9.1
3.1

2023e
3.3
6.4
6.0
34.3
5.7
15.0

2024f
3.5
1.4
5.5
8.6
8.7
9.4

2025f
3.4
6.5
5.2
-1.2
6.2
5.4

2026f
3.4
3.7
5.0
2.1
6.0
5.5

Real GDP growth, at constant factor prices
Agriculture
Industry
Services

2.5
0.8
-4.9
4.2

9.0
-1.0
3.3
10.5

3.3
4.2
5.1
2.9

3.5
2.1
-1.5
4.5

3.4
2.1
3.5
3.4

3.4
2.1
4.5
3.2Inflation (consumer price index)

7.9

2.5

-2.7

3.4

2.8

2.3

Current account balance (% of GDP)Net foreign direct investment inflow (% of GDP)

-8.9
9.3

-7.1
11.3

-6.9
13.6

-7.4
11.2

-7.2
10.2

-6.4
9.9

Fiscal balance (% of GDP)
Revenues (% of GDP)
Debt (% of GDP)
Primary balance (% of GDP)

-5.8
33.0
73.1
-2.9

-1.5
31.2
63.6
0.7

-1.3
32.6
60.1
1.7

-1.4
35.1
62.0
1.0

-0.9
35.7
60.1
1.1

0.1
35.2
57.2
1.6

0.7
1.78.4

0.5
1.2
6.4

0.5
1.1
5.9

0.5
1.1
5.9

0.4
1.0
5.6

0.4
0.9
5.4

6.9
78.4

10.0
79.6

11.5
81.0

11.9
82.3

12.1
83.4

11.9
84.4

a,b

International poverty rate ($2.15 in 2017 PPP)a,b
Lower middle-income poverty rate ($3.65 in 2017 PPP)a,b
Upper middle-income poverty rate ($6.85 in 2017 PPP)
GHG emissions growth (mtCO2e)
Energy related GHG emissions (% of total)

Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD.
Notes: e = estimate, f = forecast.
a/ Calculations based on 2018-HBS. Actual data: 2018. Nowcast: 2019-2023. Forecasts are from 2024 to 2026.
b/ Projection using neutral distribution (2018) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU.

MPO2Apr 24