A notable feature of the Seychelles economy was the high per capita GDP of US$5,900 in 1992, some fifteen times the average of sub-Saharan Africa. Total GDP was estimated at US$407 million in 1992. Economic growth, which had proceeded at a strong 5 to 6 percent annually since the mid-1980s, resumed in 1992 at an estimated rate of 4 percent.
The major source of economic activity is the tourist industry and tourist-related services in terms of employment, foreign earnings, construction, and banking. Although earnings from the tourism sector are impressive, providing about 50 percent of GDP, they are offset by the need to import large amounts of food, fuels, construction materials, and equipment, costing some 70 percent of tourism income. Gross tourism foreign exchange earnings in 1993 were SRe607 million. Moreover, the possibilities for expanding tourism are limited, and it is vulnerable to unpredictable shifts in demand, as occurred in 1991 when the Persian Gulf War contributed to a sharp decline from 103,900 tourists in 1990 to 90,000 in 1991. By 1993 there was a strong recovery in the tourist trade, bringing more than 116,000 visitors.
Hoping to avoid overdependence on tourism, the government has attempted to diversify economic activity by encouraging new industries and revitalizing traditional exports. Production of food and other items is being emphasized to reduce the heavy burden of imports needed to sustain tourism. Development of the nation's marine resources remains a principal governmental goal, pursued by expanding indigenous coastal fisheries and by profiting from fees and services provided to foreign fishing fleets operating in Seychelles' EEZ. Small traditional fishing accounted for less than 3 percent of GDP in the early 1990s but provided jobs for about 1,500 persons and growing foreign exchange earnings.
The Seychelles' traditional marketings of copra and cinnamon bark had declined to an insignificant level by 1991. The government's goal of achieving 60 percent self-sufficiency in food has not been realized although its efforts have resulted in increases in fruit, vegetable, meat (mainly chicken and pork), and tea production.
Parastatal (mixed government and private) companies proliferated in many sectors of the economy under the René regime. State-owned and parastatal companies accounted for more than half the country's GDP and about two-thirds of formal employment. The parastatals enjoyed mixed success, and by 1992 the government had begun to divest itself of selected enterprises.
Seychelles traditionally has run a large trade deficit because of the need to import nearly all manufactured and most agricultural commodities. Much of the gap has been covered by revenues from the tourism sector and to a lesser extent by remittances from Seychellois workers abroad and by overseas loans and grants.
Seychelles has been relatively successful in containing inflation. The retail price index, which includes some goods and services whose prices are set by the government, rose by 3.3 percent in 1992 and 4.0 percent in 1993. The generally stable price environment has resulted in part from wage discipline, the weakness in world oil prices, and a policy of importing from countries with low prices, including South Africa, whose currency has depreciated steadily against the Seychelles rupee.
To support its anti-inflationary strategy, the government has pursued a liberal exchange rate policy. Since 1979 the rupee has been pegged to the International Monetary Fund's (IMF) special drawing rights (SDR). The rupee's relative stability has contributed to the stability of domestic prices.
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