The monetary policy rate (MPR) will remain at 1.75 percent for the third quarter of 2024, a top official of the Central Bank of Seychelles (CBS) said on Tuesday.

The decision comes in light of the ongoing positive performance of the tourism industry, which continues to support economic activity in Seychelles.

The governor of the CBS, Caroline Abel, made the announcement during a quarterly press conference in which she explained that the board has noted that the CBS will need to continue to monitor the global situation at the moment.

"We have to remain conscious of what is happening around the world, where in 2024 a lot of countries have had elections and with that comes a change of policies and ideologies, which can affect Seychelles' tourism sector and importations," said Abel.

The decision to keep the MPR steady was also influenced by the recent reversal of the deflationary trend in inflation. Global inflation is expected to decrease in 2024, providing some relief to the economy.

In Seychelles, the year-on-year inflation rate in May 2024 stood at 0.6 percent, reversing the deflationary trend observed in average prices of goods and services since May 2023, signalling an uptick in year-on-year inflation. However, the 12-month average inflation rate over this period was -1.5 percent although a gradual increase in inflation is anticipated in the medium term.

Additionally, oil prices are forecast to remain stable at around $85 per barrel, while food prices, although currently on a downward trajectory, still face potential upside risks.

In line with this outlook, CBS has decided to maintain the Standing Deposit Facility and Standing Credit Facility rates at 0.25 percent and 3.25 percent, respectively.

By keeping the MPR unchanged, the CBS aims to provide stability and support to the economy while ensuring price stability in the face of various external and internal challenges. 

"The CBS remains committed to closely monitoring economic developments and stands ready to take further action if necessary to support economic growth and maintain price stability in Seychelles," added the governor.

Overall, the economic outlook for Seychelles remains positive, with growth in the tourism sector and increased foreign exchange transactions contributing to economic activity.

However, risks remain, particularly in the form of global geopolitical tensions and potential adverse weather conditions. It will be important for the government to closely monitor these developments and implement appropriate policies to mitigate any negative impacts on the economy, said the bank.

Additionally, it said that efforts to diversify the economy and reduce reliance on tourism should be continued to ensure sustainable growth in the long term.

"As of June 16, 2024, Seychelles welcomed a total of 166,366 tourists, which was an increase of 4.0 percent compared to the same period in 2023," explained Governor Abel.

She added; "This is primarily attributed to a rise in visitor arrivals from the traditional Western European markets, particularly Germany, France and Russia."

Estimated earnings generated by the sector grew by 7.4 percent over the period of January to May 2024, compared to the previous year.

"While the economic outlook of key tourism source markets, particularly the Eurozone and United Kingdom, has improved following a mild recession in those regions in 2023, a seasonal reduction in air connectivity as of May 2024 through to October 2024, coupled with highly anticipated international sporting events occurring in Europe over the summer, is expected to impact domestic tourism activity during that period," said Abel.