Seychelles’ Economic Outlook Amidst Vulnerabilities to External Shocks and Climate Change
The International Monetary Fund (IMF) recently concluded a vital review with Seychelles, focusing on the island nation’s economic resilience and sustainability amidst external shocks and climate change challenges. This review marks a significant milestone in Seychelles’ journey towards economic recovery and sustainability, offering a glimpse into the future of its economy.
Economic Recovery and Continued Growth
The recent discussions between the IMF and Seychelles were based on the second review of both the Extended Fund Facility (EFF) and the Resilience and Sustainability Facility (RSF). These discussions aimed at assessing Seychelles’ economic and financial program, which is crucial for the nation’s recovery and long-term sustainability.
Seychelles has demonstrated commendable economic resilience, with its economy showing signs of recovery in 2023. The nation is slowly but surely moving closer to its pre-pandemic norms, despite facing challenges from external shocks and unforeseen disasters, such as flooding and an industrial explosion. This resilience is notably reflected in its tourism sector, which has seen an increase in visitor arrivals, reaching over 91 percent of the pre-pandemic highs.
Future Prospects and Challenges
The IMF projects that Seychelles’ real GDP growth will reach approximately 3.7 percent in 2024. This optimistic outlook is supported by an expected increase in tourism, alongside growth in other key sectors like IT, construction, and finance. However, this growth is not without its challenges, as the aftermath of the December 2023 natural and industrial disasters is expected to slightly hinder economic activities.
In response to the economic performance and forecasts, Naadir Hassan, Seychelles’ Minister for Finance, Trade, and National Planning, expressed confidence in the continuous growth of the economy. Hassan highlighted the achievement of a 3.2 percent growth in GDP for 2023 and anticipates further growth in the following year.
Seychelles’ Continued Commitment to Economic and Structural Reforms
Despite the positive growth outlook, Seychelles remains highly vulnerable to external shocks and climate change. The IMF emphasizes the importance of the nation’s continued efforts towards economic reform and sustainability. This includes a focus on reducing public debt, rebuilding fiscal and external buffers, enhancing the efficiency of public spending, and providing support for vulnerable segments of the population.
Significant progress has been made in implementing the EFF and RSF, with Seychelles meeting almost all quantitative targets and making substantial strides in macro-structural benchmarks and climate-related reform measures. This is evident from the government achieving a primary fiscal surplus of 1.7 percent of GDP in 2023, which is an over-performance relative to the EFF programme target.
Looking Ahead
While Seychelles’ economic outlook is bright, the journey ahead is paved with potential challenges. The nation’s economy is susceptible to unpredictable external shocks and climate-related risks. Moreover, global issues such as conflicts, commodity and transport price fluctuations, and climate change pose additional risks to the outlook. Nonetheless, with the government’s steadfast commitment to reform and sustainability, Seychelles is poised to navigate through these challenges towards a promising future.
The IMF’s engagement with Seychelles underlines the critical need for continued vigilance and adaptive strategies to ensure economic resilience and sustainability. As Seychelles strides forward, its journey offers valuable insights into addressing vulnerabilities and harnessing opportunities for growth in the face of external shocks and climate change.
