The performance of the Seychelles tourism sector, the top pillar of the economy, for the first three months of 2023 continues to be positive, said the governor of the Central Bank on Tuesday.
Caroline Abel made the statement in a press conference on the bank’s monetary policy decisions for the second quarter of 2023.
“We have seen an increase of around 20 percent in visitors and the revenue in the first two months was 166 million euros and this is a 9.5 percent increase compared to the same period in 2022,” she said.
The sector also performed better in the last quarter of 2022 and registered a growth of 7 percent in the number of visitor arrivals compared to the third quarter of 2022. The revenue in the last three months of 2022 was 221 million euros, a 4.1 percent increase compared to the third quarter and 3.5 percent increase from the same time in 2021.
Abel said that the board of the Central Bank on Monday decided to keep its monetary policy at 2 percent for 2023. CBS says it considers it important to continue supporting the economy, given its susceptibility to external shocks. The interest rate on the Standing Deposit Facility (SDF) and Standing Credit Facility (SCF) will remain at 0.5 percent and 3.5 percent respectively.
At the international level, there are some principal factors still creating a lot of uncertainty.
These are the effects of the COVID pandemic that are still impacting the economy; the Ukraine war is still affecting the world, especially in commerce and this is, in turn, affecting inflation in many countries, increase in the exchange rate in major countries and tight monetary policies in several economies.
“The key factor that CBS focuses on and which is a preoccupation of many central banks today is inflation. Like we observed these past few years, especially during the COVID pandemic and after the war started in Ukraine, inflation at the world level has increased so high that it is affecting businesses and workers because the production cost has increased considerably,” she explained.
She said that in 2022, Central Banks had to accelerate the increase in exchange rates to try and bring under control the inflation rate but that the expectation for 2023 especially on the cost of fuel and food is a reduction of 10 to 15 percent compared to last year.
“What is important for us to keep following is the Eurozone since most of our tourists come from this region,” said Abel.
She added that a decrease in the price of fuel brings “some good news for us since we depend on the commodity to produce electricity and in transportation.”
Abel said that CBS expects inflation in Seychelles “to go below 2 percent for the first quarter and this is related to the changes in the electricity tariff. We are conscious that the cost of basic commodities abroad is going down. It is still high here and this has an effect on our inflation rate but compared to many countries we have inflation that is moderate for the time being.”
She also talked about the monetary indicators, a component that touches everyone, especially the exchange rate.
“Our observation for the past three months is that our rupee has become cheaper vis-a-vis the US dollar but more expensive vis-a-vis the euro. One of the reasons that have helped our currency to become cheaper is the increase in foreign exchange earnings which is helping to relieve some of the cost. And this is also a key component helping with lowering our inflation,” said Abel.
According to CBS’ prediction for the first three months, the exchange rate vis-a-vis the US dollar is SCR14.1, and for the euro is SCR14.90.
Ongoing banking issues in the United States
Meanwhile, CBS explained in another press conference yesterday that Seychelles has so far not been impacted by the ongoing banking issues in the United States.
As has been widely covered in the media recently, a number of banks have been affected by a run on the bank’s deposit, after a decline in the Silicon Valley Bank’s stock price.
Similar issues affect the Signature Bank and First Republic, while the first global bank to be affected was Credit Suisse.
“For Seychelles, at this point, there are no direct implications on the banking sector,” said Edouard Rose, the CBS senior financial surveillance analyst.
He added that the CBS is confident that commercial banks are stable and that there is no reason to believe that bank deposits are at risk.
Speaking about the US banking crisis, Rose explained briefly what was happening, explaining that since banks invest the money that customers put, there is not always cash on hand. If many customers withdraw a lot of money at once, the bank will run out of funds.
“Based on the most recent information that we have for Seychelles, the ratio that measures bank’s capitals, to show their resilience was on average 21.2 percent in February, well over the minimum of 12 percent required,” explained Rose, before adding that in terms of liquidity, the ratio was 47.16 percent, in February, over the minimum of 20 percent required by law.
Rose explained that in Seychelles, in case of a bank failure, the CBS may take possession and reorganise the bank.
This reorganisation may include measures to recapitalise the bank or restructure the bank to resolve weaknesses.
“Given the economic impact that a banking failure can have, it is important for any central bank to know what is going on in the banks individually and as a system,” said CBS governor Caroline Abel, adding that the CBS has staff that are dedicated to monitoring these banks and other affiliated financial services.
