Seychelles: Staff Report for the 2015 Article IV Consultation, Second Review Under the Extended Arrangement, and Request for Waiver and Modification of Performance Criteria

Macroeconomic outcomes remain solid, and most of the external pressures experienced in 2014 have abated. Weakness in the main exports combined with strong domestic demand in 2014 led to depreciation pressures on the exchange rate. Beginning in late 2014, tighter monetary policy, a recovery in tourism, and falling global fuel prices, together with the effects of the depreciation on imports, helped to contain the external pressures. The combination of spending discipline and buoyant fiscal revenues-driven by strong imports-resulted in a primary surplus of over 4 percent of GDP in 2014, exceeding the target. However, disappointing tourism arrivals ensured that growth remained subdued in 2014. Financial sector soundness indicators remain in the comfortable range; the Central Bank of Seychelles had to take management control of a small off-shore bank in October 2014 after it lost its correspondent relationship, but there should be no significant repercussions on Seychelles' economy.