(Seychelles News Agency) - Seychelles' credit rating has been upgraded to 'B+' with a stable outlook from Fitch Ratings, reflecting the rebound of the tourism sector since the country reopened its border to visitors in March.

The Minister for Finance, Naadir Hassan, told reporters on Tuesday that the upgrade from 'B'  to 'B+'  is based on several indicators.

"The key factors towards this upgrade is that most economic indicators in the country appear to be on an improving trajectory, such as improving budget deficit, reduction in debt, stabilising foreign exchange rates and other factors," said Minister Hassan.

The Fitch Ratings stated in its release Friday that "the strong rebound in economic activity in 2021 and resulting revenue growth will lead to the budget deficit contracting more quickly than previously expected. It expects the deficit to shrink from 18.4 percent of GDP in 2020 to 9.4 percent in 2021, with tourism being one of the main causes in these improving figures."

Hassan said that "despite this upgrade, there are still risks. There's a resurgence in COVID-19 cases in Europe, which is one of our main tourism markets, and this keeps a certain level of uncertainty, which is why we have to remain conservative in our policies to take into account these risks."

This was also outlined in the Fitch Ratings that the "sharp resurgence of the pandemic in main source markets for tourism is the main downside risk to the recovery of the tourism sector."

Another downside risk to the growth outlook stated in the report is the disruption in the operations of the distressed national carrier Air Seychelles.

Hassan also said that while the Seychelles' economic recovery is going better than expected, discipline needs to be maintained to ensure it keeps on improving.

He added that this upgrade is also a step forward as it gives investors more confidence in Seychelles, a group of 115 islands in the western Indian Ocean, which will lead to more investment.

On her side, the governor of the Central Bank of Seychelles (CBS), Caroline Abel, said that if things continue on this path and external factors also become more positive, predictions are that Seychelles could start seeing an improvement in the cost of living during the second half of 2022.

"This is based on global factors and is not something Seychelles can control. But if the global factors become more positive and our exchange rates remain stable, then we should definitely see a reduction of the cost of commodities on the domestic market," she said.

Seychelles' highest ever Fitch Rating was a grade of BB, which was achieved in 2019 and is the next grade after the B+ the country has just received.