Desroches Island forms part of the numerous outer Islands of Seychelles. Photo courtesy: Matthew Morgan

The tourism sector, by far the largest driver of the Seychelles economy, experienced the biggest setback in the country’s history when the global Covid-19 Pandemic hit in March 2020. In 2019, the direct income contributed by the sector was estimated at USD 590 million with value-added tax alone accounting for more than 15% of total government revenue. In 2020, tourism receipts are expected to decline by 64% compared to 2019; and, according to the World Economic Outlook, the country’s growth is expected to decline by 10.8%.


While the country reopened its borders in August, recovery of the tourism sector will take longer than anticipated as a new wave of infections continues to distort major markets in Europe. With the growing uncertainties on global tourism, the almost exclusive reliance on tourism poses a great risk for Seychelles and most SIDS notwithstanding the unique geography and rich natural and cultural heritage that positions them as key tourist destinations.

Strengthening the Ease of Doing Business

Despite the COVID-19 related economic downturn, the pandemic provides the opportunity to review the macro-economic choices and development path required to sustain the SIDS economies.

A key consideration is an urgent need for diversification into other sectors to reduce the risk of overdependence on tourism that accounts for more than 30% of their GDP, and more than 50 % for states such as Grenada and Seychelles. There is an opportunity to devise mechanisms for better integration of larger sectors such as fisheries and tourism into the local economy to enhance linkages with other sectors. This will ensure that the natural endowment is fully harnessed, and the benefits of these sectors are widely shared. This is also the time to unlock other opportunities such as building a continental hub for healthcare and IT to benefit from the African Continental Free Trade Area. Creating an enabling environment for private sector activity can be a starting point to unlock this potential.  

The Ease of Doing Business report (2020) ranked Seychelles in the 100th position globally and 8th in sub-Saharan Africa. Amongst Islands, only Singapore (2nd) and Mauritius (13th) were ranked amongst the top 20 countries, followed by St. Lucia in the 93rd position. Within Africa, Seychelles ranks 22nd in contract enforcement, 24th in protecting minority investors, and 28th in enabling access to credit and business start-ups. With improvements in the regulatory and access to credit environment, there is a clear opportunity to transition to a business-friendly environment to increase local and foreign private sector activity.


Digital Transformation to Drive Diversification

The SIDS, including Seychelles, can model regulatory and economic reforms to fast-track reforms aimed at modernising the economy, and use technology as a key to boosting diversification. The UNDP SIDS Offer “Rising Up for SIDS” proposes that digital transformation is a key driver for innovation, resilience, and strengthening SIDS economies. 

The emphasis of the 2020 budget speech on promoting digital payment systems in the financial sector demonstrates Seychelles' commitment to leveraging these assets in the digital sector. With internet penetration estimated at 74%, above the Africa average of 39%; and, the global average of 59%, the country has an opportunity to implement a digital strategy to transform the business and public sectors into a reliable and efficient ecosystem by reducing transaction costs and speeding up services. This direction will enable the creation of a more efficient system to signal the country as one of the most successful business and people-friendly economies in the region.



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