Seychelles was upgraded to B+ from B by Fitch with a stable outlook, given a strong rebound in economic activity and thereby revenue growth. Tourism arrivals have recovered faster than expected since the country reopened its borders in March 2021. Fitch expects real GDP growth to reach 6% in 2021, peak at 6.8% in 2022 and moderate to 4.8% in 2023. Fitch also expects the deficit to shrink from 18.4% of GDP in 2020 to 9.4% in 2021 (previous projection: 11.9%), and average 4.4% in 2022-23 (previous projection: 7.1%). The strong GDP growth and improved budgetary performance will result in a faster decline of gross general government debt (GGGD) than previously expected, to an estimated 77.3% by end-2021 (previous projection: 94.4%) as per Fitch. Total social transfers are expected to drop to 8.7% by end-2021 and average 6.5% in 2022-23 from 16.7% in 2020, with the expiry of pandemic related fiscal support and tapering of social transfers. Financing pressures are expected to be mitigated, with an approved 32-month $105.6mn (7.3% of projected 2021 GDP) Extended Fund Facility (EFF) by the IMF and an expected $35mn loan from the World Bank in late 2021/early 2022.

Seychelles’ dollar bond was stable – its USD 8% 2026s was at 101.003, yielding 7.71%.

For the rating action by Fitch, click here.

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