Malé, Maldives – Maldives Monetary Authority (MMA) has stated that the real Gross Domestic Product is projected to grow by 13.5 percent in 2021.
This comes while Finance Minister, Ibrahim Ameer had told earlier this year that the country’s GDP will grow by 34 percent in 2021. While speaking on a program of PSM on February 4, 2021, Minister Ameer had said that although there are about 3,000 tourists arriving daily to Maldives currently, this number is expected to increase to 5,000 arrivals per day in April as China and European countries are expected to open up by then, resulting in a fast recovery of the national GDP.
I anticipate a 34 percent increase in the GDP this year, 2021 will prove to be a very promising year for our economy.Finance Minister Ameer
According to MMA, real GDP was estimated to have declined severely by 29.3 percent in 2020 according to the moderate case growth forecast scenario one of MMA and was underpinned by a sharp decline in tourism sector and related sectors such as wholesale and retail trade, construction and real estate, as well as transport and communication amid the Covid-19 pendamic.
According to MMA, the nominal GDP in 2020 stood at MVR 57,941.6 million, a decrease of almost 50 percent compared to 2019. This is the first time in over 5 years that the Maldivian economy experienced a fall in the GDP growth rate. The fall of -29.3 percent is further exacerbated by the fact that the decrease in Real GDP was below 0, indicating that the country experienced a contraction in economic growth during 2020 as the Covid-19 pandemic hit the island nation.
As the Maldivian economy is heavily reliant on the tourism industry to power its employment rate, Foregin Direct Investments (FDI), and foreign currency exchange, the travel bans imposed by countries in an effort to curb the Covid19 Pandemic hit the economy hard in 2020 and the county’s economy is still in a state of recovery. Maldives’ tourist arrivals stood at 555,494 tourists in 2020 when compared to the 1.7 million arrivals in 2019.
The governments proposed budget for the year 2021 which was passed by the parliament after amendments from the Parliamentary Budget Committee, standing at a total of MVR 34.9 billion, an increase of MVR 134 million from the original budget had got criticism from various international monetary agencies and credit rating agencies such as World Bank and Moody’s on the 2020 expenditure on projects amidst the Covid-19 pandemic and also on the 2021 budget.
The World Bank had stated that postponing large public infrastructure investments that are not urgently needed would help address Maldives fiscal and debt sustainability risks amid the Covid-19 pandemic in 2020.
In the report “Beaten or Broken? Informality and COVID-19 – South Asia country briefs” by The World Bank highlighted the impacts of Covid-19 to the South Asian countries and has given out suggestions on how governments can combat these economic challenges. The report pointed out that Maldives faces high public debt as it has risen further due to the pandemic as external non-concessional borrowings had gone up.
Moody’s had stated in a publication dated November 13, 2020 that the proposed budget for 2021 highlighted the government’s challenging fiscal dynamics amid continuing global movement restrictions, with around one-third of the country’s revenue stemming from tourism and directly related activities.