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Seychelles - Economy (Notes)

ECONOMY Seychelles? economy rests on tourism and fishing. Employment, foreign earnings, construction, banking, and commerce are all largely dependent on these two industries. The services sector--including transport, communications, commerce, and tourism--has accounted for close to 70% of GDP in recent years. The share of manufacturing has been between 15-20% of GDP, although it fluctuates from year to year owing to changes in output from the Indian Ocean Tuna cannery. Public investment in infrastructure has kept construction buoyant, with its share of GDP at around 10%. Given the shortage of arable land, agriculture, forestry, and fishing (excluding tuna) make a small contribution to national output. GDP in 2005 was at $693 million and income per capita was at $8,682, by far the highest in Africa. This puts the island in the World Bank?s ?upper middle-income? bracket with the result that Seychelles is low on the agenda of international donors and aid flows are limited. However, given the small size of the economy, the island remains vulnerable to external shocks. Although the average per capita income is over $8,000, residents often have difficulty obtaining even basic foodstuffs, such as rice and sugar. Government mismanagement and excessive economic regulations, including a manipulated exchange rate, have resulted in foreign exchange shortages and a parallel market currency exchange rate double the official rate. In 2005 and 2006, the government implemented several measures toward the liberalization of the trade regime and the privatization of state-owned entities, such as the removal of import licenses and the partial sale of the public insurance company SACOS. In October 2006, the Minister of Finance announced measures to start the process of a gradual liberalization of foreign exchange transactions. These limited measures, however, are unlikely to influence an agreement with the International Monetary Fund (IMF), which continues to press for devaluation as an important step toward resolving the persistent shortage of foreign exchange. Although Seychelles is eligible for the African Growth and Opportunity Act (AGOA), it has failed to take advantage of AGOA thus far. Seychelles is not qualified for apparel benefits under AGOA and, in any case, its apparel manufacturing capacity is negligible.