Figure 1: Current Account Balance in the Seychelles (2016-2024)
Sources: IMF 2019, Seychelles Fourth Review Under the Policy Coordination Instrument. Note: (*) Figures from 2019 onwards are projections.
Total merchandise imports to Seychelles increased to USD 1.3 billion in 2018, from an annual average of USD 1.1 billion for 2015 to 2017[1]. Exports increased to USD 619.8 million in 2018, from an annual average of USSD 496.6 million for 2015 to 2017[2]. The slower growth in exports has not affected the Seychelles’ current account deficit, which improved slightly from an average of -USD 289.7 million (approx. -19.3% of GDP) for 2016 to 2018, to a deficit of -USD 287.0 million (approx. -17.4% of GDP) in 2019[3]. The slower growth in export earnings has deteriorated the Seychelles’ balance of payments but gross official reserves have increased.
Figure 2: Capital and Financial Account Balance in the Seychelles (2016-2024)
Sources: IMF 2019, Seychelles Fourth Review Under the Policy Coordination Instrument. Note: (*) Figures from 2019 onwards are projections.
Seychelles’ capital and financial account balance deteriorated from a surplus (net inflows) averaging USD 299.0 million (approx. 19.9% of GDP) for 2016 to 2018, to a surplus of USD 287.0 million (approx. 17.4% of GDP) in 2019[4]. As a result, Seychelles’ balance of payments deteriorated from a surplus averaging USD 9.3 million (approx. 0.6% of GDP) for 2016 to 2018, to a surplus of USD 1.0 million (approx. 0.1% of GDP) in 2019[5]. Gross official reserves increased from USD 523.0 million in 2016 to USD 548.0 million in 2018, before decreasing to USD 542.0 million in 2019[6]. During this period, Seychelles experienced persistent inward FDI inflows.
Figure 3: Gross Official Reserves and Balance of Payment in the Seychelles (2016-2024)
Sources: IMF 2019, Seychelles Fourth Review Under the Policy Coordination Instrument. Note: (*) Figures from 2019 onwards are projections.
Inward FDI inflows decreased from USD 194.6 million in 2015 to USD 191.9 million in 2017, before recovering to USD 123.9 million in 2018[7]. As a result, Seychelles’ inward FDI stock increased from an average of USD 2.9 billion for 2015 to 2017, to USD 3.0 billion in 2018[8]. Seychellois’ investments abroad have decreased as inward FDI to the country persisted.
Figure 4: Inward Foreign Direct Investment in the Seychelles (2015-2018)
Sources: UNCTAD 2019, UNCTADStat Database.
Outward FDI outflows decreased from USD 10.0 million in 2015 to USD 5.9 million in 2017, before recovering to USD 6.0 million in 2018[9]. As a result, the Seychelles’ outward FDI stock decreased from an average of USD 306.6 million for 2015 to 2017, to USD 293.6 million in 2018[10]. These capital flows have improved the Seychelles’ balance of payment but the country’s net international FDI position.
Figure 5: Outward Foreign Direct Investment from the Seychelles (2015-2018)
Sources: UNCTAD 2019, UNCTADStat Database.
The Seychelles’ balance of payment has been supported by the persistent capital and financial account surplus and narrowing current account deficit in the period from 2015 to 2018. Outward FDI flows have been decreasing as inward FDI inflows persisted. The Seychelles’ net international FDI position deteriorated from net liabilities amounting to an average of -USD 2.7 billion (approx. -189.9% of GDP) for 2015 to 2017, to net liabilities amounting -USD 2.8 billion (approx. -179.9% of GDP) in 2018[11].
Figure 6: International Foreign Direct Investment Position in the Seychelles (2015-2018)
Sources: UNCTAD 2019, UNCTADStat Database.
At these levels the Seychelles’ foreign liabilities are remain unsustainable and significant as a proportion of GDP and the country will be under significant pressure to increase its exports in order to balance its international payments. Given the relatively narrow domestic capital markets, Seychelles should focus on attracting inward FDI in sectors that will expand its productive capacity and diversify its exports because the country is still heavily dependent on agriculture-based exports. Nevertheless, the Seychelles’ balance of payments surplus is projected to improve to a wider surplus in the medium-term, which is projected to support growth of gross official reserves.
Improvements in the capital and financial account surplus should support a recovery in the Seychelles’ balance of payments despite the widening current account deficit in the forward-looking medium-term. The current account deficit is projected to widen from a deficit of -USD 287.0 million (approx. -17.4% of GDP) in 2019 to an average of -USD 335.6 million (approx. -17.6% of GDP) from 2020 to 2024[12]. The Seychelles’ capital and financial account balance is projected to improve to a surplus (net inflows) averaging USD 356.8 million (approx. 18.7% of GDP) from 2020 to 2024[13]. Therefore, the balance of payment is projected to deteriorate slightly from a surplus of USD 6.0 million in 2020 to a surplus of USD 5.0 million in 2024, but this is equivalent to an average deficit of USD 19.6 million (approx. 1.0% of GDP)[14]. Thus, the Seychelles’ gross official reserves are projected to increase from USD 541.0 million in 2020, to USD 616.0 million in 2024[15].
[1] UNCTAD 2019. UNCTADStat Database, United Nations Conference on Trade and Development: Geneva. Available At: https://unctadstat.unctad.org/ [Last Accessed: 8 March 2020].
[2] UNCTAD 2019. UNCTADStat Database, ibid.
[3] IMF 2019. Seychelles Fourth Review Under the Policy Coordination Instrument, International Monetary Fund: Washington, D. C. Available At: https://www.imf.org/ [Last Accessed: 8 March 2020].
[4] IMF 2019. Seychelles Fourth Review Under the Policy Coordination Instrument, ibid.
[5] IMF 2019. Seychelles Fourth Review Under the Policy Coordination Instrument, ibid. There is one relatively significant error and omission in the Seychelles’ balance of payments data equivalent to -USD 11.0 million in 2016.
[6] IMF 2019. Seychelles Fourth Review Under the Policy Coordination Instrument, ibid.
[7] UNCTAD 2019. UNCTADStat Database, ibid.
[8] UNCTAD 2019. UNCTADStat Database, ibid.
[9] UNCTAD 2019. UNCTADStat Database, ibid.
[10] UNCTAD 2019. UNCTADStat Database, ibid.
[11] UNCTAD 2019. UNCTADStat Database, ibid.
[12] IMF 2019. Seychelles Fourth Review Under the Policy Coordination Instrument, ibid.
[13] IMF 2019. Seychelles Fourth Review Under the Policy Coordination Instrument, ibid.
[14] IMF 2019. Seychelles Fourth Review Under the Policy Coordination Instrument, ibid.
[15] IMF 2019. Seychelles Fourth Review Under the Policy Coordination Instrument, ibid.
