Outlook for 2011-12

With the incumbent president, James Michel, having comfortably secured a third term on May 19th-21st, the next ballot is not due until 2017. Parliamentary elections are due in 2012. With the macroeconomic picture having stabilised due to extensive and continuing reform, real GDP growth is expected to remain buoyant in 2011-12 at 4% and 4.9% respectively. Inflation will return to positive, averaging 2.8%, supported by a much more stable, 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

Mr Michel secured a third presidential term with 55% of the vote in the ballot held on May 19th-21st, cementing the hold of the Parti Lepep (or People's Party-PP) on Seychelles' political scene. Mr Michel won a majority in 23 of the country's 25 constituencies on a platform of ongoing reform, putting the PP in a strong position ahead of legislative elections next year.

Economic policy

The IMF remains pleased with Seychelles' progress under its extended fund facility, with all benchmarks having been met for the third review in March. The next instalment, ofUS$5.5m, was expected to have been approved in late May. Heavy losses at the state-owned Air Seychelles have forced a restructuring, but there are no plans to privatise the firm. However, the government has sold off 40% of Seychelles Savings Bank to accountholders and staff, and is looking for strategic investors for 20% of another state-owned bank, Nouvobanq.

The domestic economy

After a record year in 2010, visitor arrivals in the first four months of 2011 were 9.9% up on the same period in 2010, pointing to another record, supported by a stronger euro and growth in new markets. Such volumes and increasing flight frequency have exposed capacity limitations at the international airport, however, which the government plans to address with a SRs45m (US$3.8m) investment in 2011-12. Production of canned tuna-Seychelles' main export-grew by 4.2% to 30,338 tonnes in 2010, but fish catches continue to dwindle, falling by 14.1% to 2,597 tonnes, highlighting pressure on regional fish stocks. Inflation, returning to positive territory, will be restrained by official subsidies despite pressures from rising external prices and lower domestic lending rates.

Foreign trade and payments

Seychelles has received a number of low-cost loans and grants over the quarter, including US$23m from the African Development Bank and the European Investment Bank for a submarine fibre-optic cable, and US$8m from China for house- and school-building.