Maldives flag Maldives: Economic outline

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. After suffering a significant economic downturn caused by the pandemic, the Maldives has experienced a remarkable recovery, thanks to the government's effective policy measures. With the resumption of tourism activities, the country's real GDP growth rebounded strongly, surging from a record-low contraction of 33.5% in 2020 to a robust expansion of 37% in 2021. In 2022, the IMF estimated the country’s growth at 10.5% thanks to buoyant tourism activity and associated spillovers to related sectors such as transportation and trade. GDP is forecast to continue growing this year and the next, although at a slower pace (6.6% in 2023 and 5.7% in 2024 – IMF).

The Maldives experiences chronic budget deficits partly due to imports for infrastructure development, an indicator that plummeted due to the COVID pandemic. In 2022, the double-digit fiscal deficit persisted (14.3% of GDP) due to heightened capital expenditure, a rise in interest payments, and an increase in wage expenses. Although the banking system remains stable, bolstered by robust reserves, potential hazards arise from the connection between the government and the banking sector. Moreover, sustained aid to State-Owned Enterprises (SOEs) amplified the vulnerabilities of the fiscal situation. In fact, The Maldives is still exposed to a significant risk of external debt distress and an overall high risk of debt distress. Although the total public and publicly guaranteed (PPG) debt-to-GDP ratio has decreased from its pandemic peak of 154% of GDP in 2020 to 122.6% in 2022 thanks to the economic rebound, it is anticipated to remain elevated in the medium term (around 117% in 2023-24). As external financing requirements are predicted to increase, it will add pressure on the already limited reserve buffers, heightening the possibility of debt rollover hazards. 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. Inflation has risen but is contained due to price subsidies (3.9% in 2022) and is projected to increase further, reaching 4.9% in 2023, reflecting the persistence of high costs of energy and food, spending pressures for the 2023 elections, and the one-off impact of the planned goods and services tax hikes in 2023 (IMF). 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. Furthermore, 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.

In the current context, the Maldives remains a relatively prosperous country in South Asia in terms of GDP per capita (USD 36,358 PPP in 2022 - IMF), and its unemployment rate remains relatively low (at 6.4% in 2021 according to the World Bank, latest data available). However, poverty remains a serious problem, with 15% of the population living below the national poverty line and insufficiently developed infrastructure. The population is largely dependent on state aid (subsidies, social benefits), thus the recent fiscal consolidation measures could also lead to increased social tensions.

 
Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 6.246.987.508.168.82
GDP (Constant Prices, Annual % Change) 13.98.15.06.55.9
GDP per Capita (USD) 15,96217,55918,56819,87221,111
General Government Gross Debt (in % of GDP) 114.4110.3111.8108.4105.1
Inflation Rate (%) n/a3.52.82.22.0
Current Account (billions USD) -1.05-1.15-0.96-1.01-0.85
Current Account (in % of GDP) -16.8-16.4-12.8-12.4-9.6

Source: IMF – World Economic Outlook Database, 2016

Note: (e) Estimated Data

 
Monetary Indicators 20162017201820192020
Maldives Rufiyaa (MVR) - Average Annual Exchange Rate For 1 GBP 20.7519.8020.5319.2519.76

Source: World Bank, 2015

 

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Latest Update: November 2023

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