Seychelles: Seychelles Outlook for 2014-15

The country (Seychelles) is situated in archipelago in the Indian Ocean, northeast of Madagascar.
Land in Seychelles is Mahe Group is granitic, narrow coastal strip, rocky, hilly; others are coral, flat, elevated reefs.
Seychellois land covers an area of 455 km²

The climate is tropical marine; humid; cooler season during southeast monsoon (late May to September); warmer season during northwest monsoon (March to May). Seychellois (singular and plural) speak Creole 91.8%, English 4.9% (official), other 3.1%, unspecified 0.2%

OVERVIEW

The ruling People's Party (PP) holds every seat but one in the legislature following an opposition boycott of the 2011 parliamentary election, and will remain firmly in charge.

The next presidential and parliamentary elections are not due until 2016. We expect the current president, James Michel, and the PP to be re-elected.

Growth in 2014-15 will be slower than previously expected, owing to ongoing euro zone weakness, but still robust, averaging 3.9%, underpinned by ongoing reform.

Despite an expected rise in utility prices, inflation will continue to moderate in 2014-15, supported by lower global commodity prices and a more stable rupee.

The fiscal balance is expected to remain in surplus, by an average of 1.7% of GDP in 2014-15, with revenue continuing to rise owing to ongoing reform.

The current-account deficit will widen in 2014, to 22.6% of GDP, owing to strong import demand, before narrowing again in 2015, to 16.8% of GDP, supported by growth in tourism and lower import prices.

Political outlook

The government declared the cholera outbreak a national emergency on August 16th. Any mismanagement of the outbreak could weaken the government\'s position ahead of upcoming elections.

Economic policy outlook

A Bangladeshi company has announced plans to invest US$59m in agriculture, reflecting government efforts to attract foreign investment in the sector.

Economic forecast

African Minerals\' reduction of its production estimate for the Tonkolili iron ore mine is likely to have a negative result on GDP increase in 2012.

Outlook for 2013-14

• The ruling People's Party (PP) took all but one of the seats in the May 2011 parliamentary election following an opposition boycott, and will remain firmly in charge.
• The next presidential election is not due until 2016, since the incumbent president, James Michel, is only into the second year of his second term and is expected to remain in power.
• Although affected by turmoil in Europe, real GDP increase will accelerate in 2013 to 3.2%, underpinned by ongoing reform and non-European tourism.
• Having spiked in 2012 owing to higher energy prices and a weakening rupee, inflation will moderate in 2013-14, even with the introduction of a price-added tax (VAT) in 2013, as it simply replaces a goods and services tax.
• The fiscal surplus is expected to widen to an average of 1.7% of GDP in 2013-14 on the back of robust revenue increase and ongoing reform.
• The current-account deficit will edge down in 2013 and 2014 to 10.9% of GDP and 9.2% of GDP respectively, supported by increase in tourism.

Review

• The national consultative forum proposed by Mr Michel in June to boost national unity met for the first time in July, and again in August.
• The governments of Seychelles and South Africa have agreed to establish a joint commission by 2015 to develop political and commercial relations.
• In early August the Norway-based Extractive Industries Transparency Initiative accepted Seychelles as a candidate country.
• Seychelles and Sri Lanka have signed a number of agreements, including one to establish a joint commission intended to deepen political and commercial relations between the two countries.
• In July Comoros and Seychelles signed an open skies agreement, under which Seychelles' flagship carrier, Air Seychelles, will have unlimited access to Comoran skies.
• The signing of a codeshare agreement with Hong Kong Airlines will further develop Air Seychelles' push into the Asian market.
• At the end of August Seychelles became the 46th country to commit to the automatic tax information exchange scheme developed by the G5 countries.