Maldives: Economic Outline

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

The Maldives has been a development success until 2020, enjoying robust growth coupled with considerable development of infrastructures and connectivity. Economy growth stood at 7% in 2019 with the completion of large infrastructure projects and the slow transition to new ones. According to the updated IMF forecasts (2022), due to the outbreak of the COVID-19, GDP growth fell by -32% in 2020, picked up to 18.9% in 2021 and should reach 13.2% in 2022, subject to the post-pandemic global economic recovery.

The country was a leading destination for high-end tourism, which should continue to be the main driver of growth when borders will reopen worldwide. Restoration of tourist arrivals and overall GDP to pre-pandemic levels is expected for early 2023 (Coface, 2022). Other important services sectors, such as retail and transport, will follow the pace of tourism. Recent infrastructure investment helped relieve supply bottlenecks in the sector. Growth was also sustained by an expansive fiscal policy. The Maldives experiences chronic budget deficits partly due to imports for infrastructure development, an indicator that plummeted due to the COVID pandemic: the government faced an overall budget deficit of 6.6% of GDP in 2019, which increased to 22.7% in 2020 and 18.1% in 2021 (COFACE, 2022). Over the medium term, public debt, which was equal to 78% of GDP in 2019, has increased to 146% in 2020 and 137.2% in 2021. It is forecasted to reach 133.3% in 2022 and 128.2% in 2023 (IMF, 2022). According to the latest World Economic Outlook of the IMF (2022), the rate of inflation was negative by 1.6% in 2020, and increased to 1.4% in 2021. It should reach 2.3% in 2022. External risks stem from trade tensions and policy uncertainty, and slower growth in advanced economies and China as well as border closures are impacting negatively tourism and undermine the weak external position. Diversifying the economy beyond tourism and fishing, reforming public finance, increasing employment opportunities, and combating corruption, cronyism, and a growing drug problem are near-term challenges facing the government. Following his victory in 2018 presidential elections, Ibrahim Mohamed Solin has pledged to restore democratic institutions and the freedom of the press, re-establish the justice system, and protect fundamental human rights. Considering that 80% of its territory is less than one meter above sea level, the government is worried in the long-term about the impact of erosion and global warming on the low-lying country.

China has established its influence through a free trade agreement and significant infrastructure investments (over USD 1.2 billion) under the Maritime Silk Roads project. Moreover, loans from China make up 45% of the country’s national debt. However, the new administration seeks a diplomatic pivot towards India, manifested in a USD 400 million loan to finance various infrastructure projects. The signing of a military agreement with the U.S., which announced plans to open an embassy, signals a trend of geopolitical rapprochement with the West (Coface, 2022).

In the current context, the Maldives remains a relatively prosperous country of  South Asia in terms of GDP per capita (USD 12,464 in 2020 from USD 9 889 in 2021, Coface data), and its unemployment rate remains relatively low at 6.4% in 2020 from 6.1% in 2019 (Department of National Planning, Republic of Maldives, 2022). However, poverty remains as a serious problem, with 15% of the population living below the national poverty line and infrastructure remains insufficiently developed. The population is largely dependent on state aid (subsidies, social benefits), thus the recent fiscal consolidation measures could also lead to increased social tensions.

Monetary Indicators	2016	2017	2018	2019	2020
Maldives Rufiyaa (MVR) - Average Annual Exchange Rate For 1 GHS	3.85	3.54	3.36	2.96	2.75

Source: World Bank - Latest available data.

© eexpand, All Rights Reserved.
Latest Update: February 2023