Despite having one of the highest per capita incomes in Africa, Seychelles is vulnerable economically, due to its small size, isolation, limited natural resources and dependence on tourism, which accounts for the bulk of foreign-exchange earnings. Though tourism worldwide grew strongly during the 1990s, and cheaper long-haul flights made destinations such as Seychelles more accessible, the industry became increasingly competitive. Imports needed for tourism were in large part responsible for the country’s trade deficit. GDP grew by 1.4 per cent p.a. 1979–89.
Consequently, the government made efforts to diversify the economy, encouraging farming, fishing and manufacturing in the whole country including the outer islands. State-owned and parastatal enterprises accounted in the mid-1990s for more than half of GDP and some privatisation of state enterprises was under way during the 1990s. By the late 1990s, there was good growth for several years, and canned tuna became the major export.
But the economy underwent a small overall decline during 2001–04, before growth strengthened to seven to ten per cent in 2005–07, as a result of increased foreign direct investment and tourism receipts. Then, in 2008, in the teeth of the world economic downturn, the economy stalled and Seychelles turned to the IMF for emergency support. With a sharp fall in tourism income and cuts in public expenditure, GDP shrank by 2.1 per cent in 2008 and by 1.1 per cent in 2009. However, in response to economic reforms initiated in late November 2008, in 2010–11 the economy bounced back, with two years of strong growth, followed by good steady growth in 2012–15.