Seychelles Growth Set to Slow to 1% as Tourism Feels the Middle East Conflict’s Impact

Seychelles' economic growth is projected to slow to 1% in 2026 from 5.8% in 2025, according to an International Monetary Fund staff assessment that identified weaker tourist arrivals as a visible consequence of the Middle East conflict. An IMF team led by Todd Schneider visited Victoria from September 21–30 for the country's Post-Financing Assessment, reporting an early recovery in tourism alongside broadly stable external conditions and limited signs of financial-sector stress.

Tourism begins to recover after several difficult months

The decline in tourist arrivals was particularly noticeable between March and June, with subsequent months showing the beginnings of a recovery, according to Schneider's statement at the conclusion of the mission. That improvement has not removed the prospect of a sharp slowdown in annual growth, with the IMF's 1% projection putting the expected pace of expansion well below the previous year's level. The assessment describes the tourism recovery as nascent, indicating that the rebound remains at an early stage.

The growth figures point to an economy expected to keep expanding at a much slower rate, with the disruption to visitor arrivals forming a central part of the IMF's account of recent conditions. The statement did not provide an estimate for the decline in tourist numbers or a timetable for a fuller recovery, leaving the scale and durability of the recent improvement uncertain.

Subsidies contain prices but put pressure on public enterprises

Headline inflation remained moderate at 0.9% through August, reflecting subsidies provided through state-owned enterprises to limit how much rising international commodity prices reached domestic markets. Those measures helped contain the immediate increase in prices faced locally, but their cost weakened the balance sheets of some public enterprises and reduced the dividends they paid into the government budget.

The findings show that keeping domestic prices stable has carried costs elsewhere in the public sector, with some state-owned businesses absorbing financial pressure and the government receiving less income from their operations. The IMF statement did not quantify the subsidies or the reduction in dividend payments, though it identified both as consequences of the response to higher international commodity prices.

Currency and reserves hold steady ahead of December review

Seychelles' external position has remained broadly stable despite the recent shock, with the rupee holding broadly steady against the US dollar and central bank foreign exchange reserves covering about four months of imports. Financial-sector stress also appeared limited, according to the mission, suggesting that the weaker growth outlook had not been accompanied by widespread financial strain at the time of the assessment.

Schneider thanked the Seychellois authorities for constructive and open discussions during the visit, which examined conditions under the IMF's Post-Financing Assessment process. The IMF Executive Board is expected to discuss Seychelles' 2026 assessment in December, with the staff findings highlighting slower growth, an emerging tourism recovery and the financial costs of measures used to contain domestic prices.