- After a stagnating 2005, Seychelles is set to experience a significant economic growth of 4.5 percent this year. The economic recovery of the island nation is due to an expanding tourism industry, but also some tough years of reforms that finally are bearing fruit.
The news was so good that the leading newspapers in Seychelles, the 'Nation', found no need to edit it. Today's top news on its website - "Economic situation improving" - was linked to an uncommented statement by the International Monetary Fund (IMF).
After some tough years, the Seychellois were happy to read the economic outlook as presented by an IMF mission that visited the pleasant archipelago for two whole weeks and issued its concluding statements in Victoria yesterday. "The economic situation is improving, with strong tourism arrivals and construction activity driving the recovery," the statement started.
According to information and data gathered from Seychelles authorities, real GDP growth was projected to reach 4½ percent in 2006, signalling the first year of real growth for a longer time. Last year, economic growth was at only 1.2 percent, which was almost totally eaten up by a population growth of 0.65 percent. Consumers in general had noted tougher times.
But growth had also come as a result of economic reforms. "Following the July 2006 presidential election, the authorities are implementing a package of policy reforms aimed at addressing Seychelles' key macroeconomic imbalances," the IMF assessment said. These policies had included new currency exchange guidelines, banking reforms and repayment of external debt.
According to the IMF, however, the reforms carried out lately were not enough to secure long-term growth. The Fund recommended further "structural reforms, including measures aimed at eliminating potential growth bottlenecks in terms of employment and infrastructure, further privatisation, and the gradual elimination of price controls." With a long time to the next elections, the Victoria government was seen to have a window to embark on such normally unpopular reforms.
Despite Seychelles being too rich and developed to receive financial aid from the IMF or the World Bank, the country announced its need to consult with these institutions in May 2003, after the economy had started stagnating. In mid-2004, a Seychellois government team travelled to Washington "to discuss the broad plans of the strategic economic package" to reform the nation's economy.
Seychelles has one of the strongest economies in Africa, but the Indian Ocean island nation has experienced economic hardships during some years. Successes in the tourism sector have prevented a deeper focus on economic reform, and the Seychellois economy in many ways is governed by worn-out models from the nation's socialist and authoritarian past. An unstable tourism market since 2001 - which however has been very positive in 2006 - has therefore been able to harm the islands strongly.
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