In recent years, the IMF has released a growing number of reports and other documents covering economic and financial developments and trends in member countries. Each report, prepared by a staff team after discussions with government officials, is published at the option of the member country.
The global economic environment continued to provide little stimulus for SSA in 2003.2 While world economic growth increased from 3 percent in 2002 to 3.8 percent last year, world import demand did not keep pace and expanded by only 3.2 percent in the advanced economies, where most SSA exports are marketed. In addition, the external terms of trade for the region as a whole were largely unchanged, improving by about 2 percent for the oil exporters and declining by a similar amount for the non-oil economies. Some non-oil exporters received a boost to their terms of trade from stronger commodity prices, especially cotton (up 37 percent), groundnuts (up 30 percent), and robusta coffee (up 25 percent). However, despite these price increases, most key commodity prices remain very low relative to historical averages. On the positive side, world inflation remained low, helping contain inflation in SSA countries with exchange rate pegs. In addition, lower world interest rates kept domestic interest rates in SSA lower than would otherwise have been.
Six basic themes emerge from the 2003 outturn: (i) average growth in the region remains far below the 7 percent estimated to be needed for the region as a whole to reach the MDGs on income-based poverty; (ii) growth experiences continue to be diverse, and some countries appear to be on a path of relatively strong sustainable growth; (iii) domestic policies matter—countries facing the same external environment are having very different growth experiences; (iv) conflict, civil strife, drought, and poor policies continue to be the causes of the worst growth experiences; (v) net exports have not been the source of economic growth, except in the oil exporting countries; and (vi) the achievement of growth rates sufficient to significantly reduce poverty will require higher rates of investment, which, in the absence of higher rates of national savings, will need to be financed through larger official and private capital flows.
The outlook for 2004 is relatively upbeat. Economic growth rates will rise, inflation rates is expected to fall, investment and savings rates are projected to increase, external current account balances will be largely unchanged, and net international reserves coverage will stabilize. This improvement will be supported by a general reduction in fiscal deficits and a further tightening of monetary policy.
Program implementation and economic fundamentals continue to be strong, but the external position weakened in mid-2014. Projected growth for 2014 has been revised down to 2.8 percent from 3.7 percent, due to weaker demand for Seychelles’ two main exports—tourism and canned tuna. At the same time, strong growth in personal earnings and private sector credit have fueled a surge in imports, putting further pressure on the balance of payments. As a result, the exchange rate depreciated an estimated 11 percent in nominal effective terms from early August to late-October.
This paper discusses Seychelles’ Eighth Review Under the Extended Arrangement. Economic growth and macroeconomic stability improved in 2013. A robust rise in tourism earnings supported growth, as well as a reduction in the current account deficit as a share of GDP. All performance criteria for end-June 2013, the program’s last test date, were met. All the third quarter indicative targets were also met. The measures in the structural benchmarks were all completed, although there were short delays compared with initial plans for technical reasons. IMF staff recommends completion of the eighth review under the Extended Arrangement.