afrol News, 29 October - Already early this year, the Seychelles economy showed it had recovered from last year's recession through tough reform programmes. Now, new figures show the Indian Ocean state is entering a boom
2008 and 2009 were tough years in Seychelles, where a home-made crisis strongly added to the effects of the global finance crisis. Indeed, 2008 saw a negative growth of GDP and forced government to renegotiate its foreign debts. President James Michel announced tough reforms and large cuts in public spending.
In 2009, the reforms already started to bite. The International Monetary Fund (IMF) originally predicted a catastrophic year for the Seychellois economy, with GDP decreasing by almost 8 percent. In fact, the Fund's latest figures show that Seychelles managed to maintain at least zero growth last year.
In May this year, an IMF mission to Seychelles meeting with President Michel and other stakeholders, was surprised by the quick results of the country's structural reforms. Real GDP was projected to grow at 4 percent in 2010, "reflecting primarily a rebound in tourism earnings," concluded the IMF mission.
During the last two weeks, yet another IMF mission visited Victoria, the Seychellois capital. Again, mission leader Jean Le Dem was surprised by the quick recovery of the national economy.
The IMF, after studying facts and figures presented by the Seychelles government, had to adjust its growth projection for 2010 further upwards. "Economic growth is now projected to exceed 6 percent in 2010," Mr Le Dem announced in Victoria yesterday.
In a relatively wealthy country, whose population growth is averaging less than 2 percent annually, a GDP growth of over 6 percent can only be described as an economic boom. In addition, the IMF registers that inflation in Seychelles is close to zero, meaning that the growth will create new wealth for Seychellois businesses and citizens.
Shaken by the rapid changes in the Seychellois economy, the IMF remains conservative in its mid- and long-term projections for economic growth on the archipelago. "Prospects for 2011 are favourable. Despite the fragile global recovery, the tourism drive, and encouraging prospects for tuna exports suggest that growth could be around 4.3 percent," Mr Le Dem carefully predicts.
Contrary to most other countries, IMF analysts have made no long-term projections for economic growth in Seychelles. Its latest forecast, made in June, foresees GDP growth rates of around 5 percent in 2011 and 2012.
According to Mr Le Dem, the surprisingly large growth in Seychelles this year comes as a consequence of "a rebound in tourism, sizeable foreign direct investment, and a widespread pick-up in the domestic economy." In addition, the "strong progress" in implementing economic reforms had created the foundation for this sudden growth.
Seychellois authorities are bound to continue on their new success-bound policy road. A complete modernisation of the tax system, including the introduction of a value added tax (VAT), is soon to be implemented. Meanwhile, the tourism industry is supported in its strongly expansive efforts to open new markets and attract investors.
The IMF conservative growth projections for Seychelles in 2011 and 2012 therefore could soon need positive revisions as the country's economy continues to surprise analysts.
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