Seychelles Economic Outlook

• Gross Domestic Product (GDP) growth in the Seychelles was higher than expected in 2011 but is on a declining trend.
• The government persisted with economic reforms and a fiscal policy stance aiming at reducing public debt.
• Youth unemployment is relatively low, but challenges remain, such as a certain reluctance to hire first-time jobseekers and a preference for expatriates.

In spite of a decline in foreign direct investment (FDI) and higher food and fuel prices, the Seychelles economy grew at 5% in 2011, higher than previously expected. This performance was due to an 11% rise in tourism numbers and the positive impact of economic reforms. Tourism will continue to be the main driver of economic growth in 2012/13 but as 70% of tourists come from Europe, the financial crisis there means  GDP growth is expected to slow further in 2012. Higher inflation and interest rates, combined with continued fiscal consolidation, will dampen domestic demand. From 2013 GDP growth is expected to increase, thanks to a more favourable global economic environment, local reforms, and higher investment and consumption spending. Following the re-election of President James Michel, the government maintained a fiscal policy aiming at reducing public debt, and will continue to post budget surpluses in 2012 and 2013. The planned introduction of value added tax (VAT) in 2012 is well on track, and a new Public Finance Bill was approved by the cabinet in late 2011. Progress continues to be made in improving the regulatory framework of investment. Amendments to the Financial Institutions Act have established the legal basis for new financial products, boosted competition and reduced the state’s role in the financial sector. Seychelles has recently prepared a new sustainable development strategy and a new national development plan will be prepared in 2012.

Youth unemployment in the Seychelles is relatively low, as there are generally enough jobs on offer, and the government provides various training programmes.

However, challenges remaining include the attitude of Seychellois youth and the impact of drugs and substance abuse, which explain why there is some reluctance to hire firsttimejobseekers and a preference for expatriates.