Seychelles’ exports have continued recovering from the shock caused by the COVID-19 pandemic. The country’s total merchandise exports increased to USD 463.8 million in 2021. Seychelles has a relatively concentrated export profile and earnings from seafood have begun recovering despite being below the medium-term average at USD 125.3 million (approx. 27.0% of total exports) in 2021. Other top exports from Seychelles include petroleum and fish. These exports contributed USD 210.6 million (approx. 45.4% of total exports). Seychelles’ export earnings from petroleum have continued increasing to USD 117.1 million in 2021; and earnings from fish have begun recovering despite being below the medium-term average at USD 93.5 million in the same period. Seychelles’ trade deficit narrowed despite being wider than the historical medium-term average of -USD 235.2 million for 2018 to 2020, to -USD 274.9 million in 2021.
Total merchandise export earnings have begun recovering despite being below the medium-term average which ameliorated the relieved pressure caused by net FDI inflows (foreign capital being invested domestically). Seychelles’ FDI inflows increased to USD 156.9 million in 2021. Hence, Seychelles’ FDI stock has gradually continued increasing from an annual average of USD 3.25 billion for 2018 to 2020, to USD 3.34 billion in 2021. This does not bode well for Seychelles as a country that is aiming to attract more foreign investment to diversify its economy away from the reliance on seafood exports. However, this could also signify the limited economic opportunities in small island state.
Remittances receipts have decreased over the period. Personal remittances received have not recovered from COVID-19 and continue decreasing from an annual average of USD 18.8 million for 2018 to 2020, to USD 9.5 million in 2021. Personal remittance payments to foreign nationals have begun increasing since the COVID-19 pandemic despite being below the historical medium-term annual average of USD 62.7 million for 2018 to 2020, to USD 48.9 million in 2021. Seychelles has had net remittance outflows (net remittance payment to foreign nationals) which decreased to USD 39.4 million in 2021. This has affected the current account balance and strength of the SCR over the period.
The SCR has continued depreciating. In nominal terms, the SCR depreciated by an annual average of -9.1% against the USD for 2018 to 2020. The SCR depreciated by -19.3% to an annual average of SCR 16.9 per USD in 2021. Seychelles’ current account deficit narrowed despite being wider than the historical medium-term average. In 2022, Seychelles’ current account deficit continued narrowing despite being wider than the historical medium-term average. In particular, Seychelles has benefited from the higher fuel prices and bountiful sea harvest. However, Seychelles has been affected by the higher fuel and food prices which continued appreciating due to lower global supply following the sanctions against Russian exports after its military exercises in Ukraine. This is also reflected in the projections for Seychelles’ current account balance.
In 2023, Seychelles’ current account deficit is projected to widen beyond the historical medium-term average to -USD 163.0 million (approx. -7.7% of GDP). In the medium-term from 2024 to 2026, Seychelles’ current account deficit is project to continue widening, to an annual average of -USD 202.3 million (approx. -8.3% of GDP). This illustrates a persistent deterioration of the current account balance due to the decreasing foreign inflows from current and capital payments; as well as high fuel and food prices which are primarily driven by the impact of sanctions against Russia and the conflict with Ukraine. However, this could change in the medium-term due to the expected impact of geopolitical tensions on foreign capital flows. Therefore, Seychellois authorities are still faced with uncertainty ahead unless they can take advantage of opportunities in petroleum and fish to offset the cost of high fuel and food imports.
The issue of developing and diversifying the Seychellois economy remains an elusive obstacle for the country. Seychelles still has a significant potential to grow its exports from petroleum and fish. These represent the highest growth potential towards diversifying the Seychelles’ economy and export earnings. Apart from this, Seychelles should also deepen its integration in the SADC region and increase its intra-regional trade. This will provide an opportunity for Seychelles’ exports to compete against goods and services of comparable quality from the SADC region. Moreover, Seychelles can offset the risks with its traditional export markets by increasing its dependence on the SADC region for its exports.
