Outlook for 2011-12

The president, James Michel, can expect to secure a second term at the presidential election scheduled for May 19th-21st. Parliamentary elections are not due until 2012. With the macroeconomic picture having stabilised owing to extensive and continuing reforms, real GDP growth is expected to remain buoyant in 2011-12 at 4.4% and 4.9%, respectively. Inflation will return to positive territory, averaging 3.2%, supported by a much less volatile, if still slightly depreciating, rupee and rising global commodity prices. The authorities will continue to run a fiscal surplus, albeit a narrowing one as public investment spending rises.

The political scene

The presidential election has been set for May 19th-21st. The incumbent, James Michel of the People's Party (Parti Lepep) is expected to secure a second term. Mr Michel appointed a new seven-member media commission to act as watchdog, deal with complaints, and encourage the development of the press and media freedom. The struggle against Somali piracy continues, with a failed attempt by the Seychelles Coast Guard to rescue a ship in its waters in January. The Ministry of Finance puts the immediate costs of piracy at US$17m in 2011.

Economic policy

The 2011 budget presented in December maintains a tight fiscal stance, running a surplus, albeit a narrowing one as investment rises, for a third consecutive year. The IMF has released a further US$2.7m from its US$30m extended fund facility, but has noted that Seychelles' rapid repayment of domestic debt has generated excess liquidity within the financial system, which poses a risk to inflation. A number of financial and fiscal reforms are planned for 2011.

The domestic economy

Seychelles' economy rebounded strongly in 2010, with real GDP growing by 6.2% according to the IMF, underpinned by a record year for tourism as visitor numbers climbed by 11% to 174,529, an all-time high. Inflation continues to edge up month on month and is set to accelerate in 2011. In November Seychelles Cable Systems signed a US$30m contract to lay a 1,900-km submarine fibre optic cable linking Victoria with Dar es Salaam in Tanzania, and thereby connecting Seychelles to the global fibre-optic system for the first time.

Foreign trade and payments

In mid-January a new three-year fisheries protocol with the EU came into effect The EU will pay EUR3.4m (US$4m) a year for the rights to catch 52,000 tonnes of tuna while sector support grants will rise from EUR1.2m to EUR2.2m. Marine exports reached SRs2.5bn (US$205.6m) in 2010, down from SRs3bn (US$215.9m) in 2009.