Seychelles sees GDP growth up, debt reduction on track

By George Thande VICTORIA (Reuters) - A recovery in tourism will help the Seychelles' economy grow by a faster-than-expected 3.5 percent this year, then accelerate to 4 percent by 2015, the country's finance minister said on Tuesday. The tourism sector, the country's economic mainstay, has been battling to fill hotel beds during the global economic slowdown. Long known as a playground for royals and tycoons, the Indian Ocean archipelago has been turning to Asia in search of new business. "This stronger growth will be supported primarily by continued recovery of our principal European tourism markets and expansion of new markets," Finance Minister Pierre Laporte told parliament in his 2014 budget reading. Laporte told parliament the Seychelles' public debt would fall to 69 percent of national output. He forecast a primary surplus of 4.4 percent of gross domestic product in 2014, after a revised 5.2 percent this year. The Seychelles teetered on the brink of bankruptcy in late 2008 after decades of unsustainable public spending. After defaulting on a Eurobond repayment during a balance of payments crisis, the country has implemented a raft of reforms to liberalise its economy. Public debt at 69 percent of GDP would put the Seychelles on track to reach its long-term debt objectives, Laporte said. The government aims to reduce its debt-to-GDP-ratio to 50 percent by 2018. Tax and non-tax revenue combined was budgeted at 5.7 billion rupees, Laporte said, 3 percent higher than revenues in the revised 2013 budget. Total expenditure will rise 4 percent to 6 billion rupees. The finance minister announced a 3 percent cut to business tax, excluding banks, telecommunications firms, insurance companies and breweries, to leave it at 30 percent. The minimum wage will rise by 20 percent for all workers apart from casual labourers, he said. "Through the lowering of business tax to 30 percent for most medium-sized businesses, this will allow the private (sector) to absorb the increase minimum wage, without the need to increase the cost of goods and services," Laporte told parliament. Maintaining reforms to public enterprises, Laporte said the government was selling a 27 percent stake in Seychelles Commercial Bank, its 50 percent share in Bank of Muscat International Offshore and its shares in the State Assurance Corporation of Seychelles.