Effect of Covid-19 on Employment in the Maldives

Covid-19 pandemic has impacted the world in ways indescribable within a blink of an eye. One of the majorly impacted areas throughout the world is undoubtedly the economy. Like rest of the world, the Maldivian economy has struggled with the devastating consequences. While the global economy witnessed an economic downturn of a magnitude and speed that were unprecedented in peacetime, the Maldivian economy experienced a dire fall in economic activity in the year 2020. To analyze the depth of this effect on employment, a study was conducted by Ministry of Economics by using data gathered from the income support allowance program that was administered through the online JobCenter (JobCenter.mv) portal. A rapid assessment on the employment impact had also been conducted by the United Nations Development Programme (UNDP) in collaboration with the Ministry of Economic Development previously in June 2020.

According to this recent study, the real gross domestic product (GDP) is estimated to have declined by 33.5% during 2021, reflecting the adverse impact of strict lockdown measures implemented to prevent the spread of the novel virus. Tourism industry, which is the main driver of the economy, crippled, while many other tourism-related businesses struggled to stay in business. Consequently, the economic fallout from the global pandemic has put an unprecedented toll on employment.

The pandemic led to a record high level of layoffs, although the effect was limited, to some extent, due to the stimulus package introduced by the Government. While an ample amount of job terminations and salary reductions were associated with the adverse effect experienced by the tourism sector, prolonged closure of workplaces and ceased business activities magnified the negative impact on employment. Additionally, Small and Medium Enterprises (SMEs) along with self-employed individuals generally constrained by credit, lost more income due to low demand for services. However, with the gradual relaxation of containment measures from June 2020 onwards, business operations resumed, resulting in an improvement on the employment situation.

As per the report, to minimize the economic impact of the pandemic, the Government announced an Economic Recovery Plan (ERP) of USD162 million (equivalent to 3.4% of GDP) on 20 March 2020. This mainly included a loan scheme to support resorts, large businesses and SMEs, and an income support allowance scheme to support individuals who lost their jobs and faced salary reductions. The loan scheme provision was conditioned on retainment of employees in those businesses. With the condition met, resorts and large businesses with an annual turnover of MVR10 million could apply for a maximum loan of MVR7.7 million and MVR1.0 million respectively. Businesses with an annual turnover of less than MVR10 million or SMEs were eligible to apply for a maximum loan of MVR500 thousand. The income support scheme provides an allowance of up to MVR 5,000 per month for individuals whose employment was affected by the crisis and self-employed individuals who faced loss of income due to the crisis.

Furthermore, youth population (18-34 years) in Maldives, comprises of a large portion of the labor force, accounting for around 50% of the country’s labor force. Additionally, the service sector being the biggest industry of the country employs the highest number of workers (133,972 people) and represents almost 74% of all employment in the Maldives. According to the results of this study, at least 13% of the employed population of the country must have been affected by the pandemic, either through a job loss or income loss. Regarding the nature of the impact, 6% of the employed population faced a salary loss (either in the form of no-pay leave or reduced-salary), while 2% of the employed people lost their jobs (terminated) during the pandemic. Some of the applicants interviewed to collect data for this study, who initially claimed no-pay leave were later terminated, hence it was inferred that at least 6% of the employed population lost their jobs during the pandemic. Among the people who received the allowance, 11,976 (52%) applicants were employed people and 10,964 (48%) were self-employed persons. This translates to around 9% of the total number of employed people in the country were impacted, while 25% of the total self- employed people in the population faced some form of income loss during the pandemic.

Under the income support allowance program, a total of MVR421.0 million was disbursed, of which a total of 52% was claimed by employed persons, whereas a total of 48% was claimed by self-employed individuals. Moreover, the total amount received by each applicant remained relatively equal in each category, with a typical applicant in the employed category receiving MVR18,337 and MVR18,371 in the self-employed group. Looking at the main industries of those who received the allowance, most of the beneficiaries are amongst people working in the accommodation and food service activities (making up 32% of the total recipients). This was followed by manufacturing (with a share of 20%) and agriculture, forestry, and fishing (19%), which mainly consists of self-employed persons. While beneficiaries from other industries were significantly low, transport and storage, construction, wholesale and retail, arts and entertainment, and education were other key sectors with a relatively high number of beneficiaries.

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