Growth accelerated last year on expansion in tourism and an impressive revival in construction. The outlook for the Maldives is for moderately slower growth on less robust gains in tourism from major tourist markets. Higher capital expenditure and the promotion of special economic zones are planned toward raising growth potential. However, high public debt requires improved efforts to reduce recurrent expenditures and keep budget deficits sustainable.
|Selected economic indicators (%) - Maldives||2015||2016|
|Current Account Balance (share of GDP)||-6.3||-6.1|
Source: ADB estimates.
Government data show economic growth in the Maldives to have accelerated to an estimated 6.8% in 2014 from 4.7% in the previous year. Tourism and related transport and communication remained key contributors to growth, while, in contrast with the previous 2 years, construction contributed substantially to expansion.
Preliminary estimates show that tourism expanded strongly by 6.8%, albeit less than the 9.0% growth recorded in 2013. Growth in tourist arrivals at 7.1% in 2014 was much less robust than the 17.4% seen in the previous year as European economies were sluggish and the People’s Republic of China (PRC) experienced a slowdown. Asian tourists now make up 47% of the market of 1.2 million visitors per year, most of them from the PRC. The share from Europe, which used to be the major market, has declined to 44%.
Construction rebounded substantially, by an estimated 20.6%, after a 2.5% contraction in 2013. The bulk of construction is in new resort projects and real estate development, notably on Hulhumalé to help relieve overcrowding in the nearby capital, Malé.
Growth in the gross domestic product is forecast to average 6.3% in 2015 and ease to 5.1% in 2016. Tourism is projected to see growth rebound to 8.3% in 2015 as the government forecasts 13.0% growth in tourist arrivals. The launch of three new flights to the PRC this year and a strengthened promotion campaign support this projection. Tourism expansion will moderate in 2016 in light of the low growth outlook in tourist source economies. Growth in related transport and communication is expected to follow a similar trend.
Construction will continue to expand but at a moderate pace of 8.0% in 2015 off the high base in 2014. Construction is expected to grow at a similar rate in 2016 as work gathers pace on government infrastructure and private investments connected with the new special economic zones.
Excerpted from the Asian Development Outlook 2015.