Maldives Monetary Authority publishes 2014 annual report, estimates total tourism receipts at US$2.6bn

Male CityThe Maldives Monetary Authority has published its annual report for the year 2014. The report covers developments in the domestic economy that took place throughout the year, and places them against a backdrop of developments in the global economy. Activities and developments of the Authority are also recorded. Analysis is derived from information received throughout the year from government authorities, financial sector agencies, public enterprises and other private sector sources. An outlook for 2015 is also included.

Macroeconomic Developments

In its overview of macroeconomic developments, the report noted that the continued recovery of the global economy and lower global commodity prices contributed to the real gross domestic product (GDP) growth of the Maldivian economy registering at 8.5% in 2014, down from 8.8% in 2013.

Domestically, this growth was attributed to a solid increase in tourist arrivals and the strong recovery of the construction sector. The growth in tourist arrivals was in spite of weak performance from the Russian market and was supported by higher arrivals from the Chinese market and other emerging source markets. Total tourist receipts to the country remained buoyant, reaching an estimated US$2.6 billion during 2014.

Elsewhere, a decline in fish catch and decreased international tuna prices meant that the fisheries sector weakened in 2014. However, the construction sector rebounded strongly in 2014 after two consecutive years of negative growth, largely driven by the resumption of large-scale public sector infrastructure and housing projects. The wholesale and retail trade sector also remained buoyant in 2014, as indicated by its key performance indicators.

The rate of inflation remained subdued throughout the year and eased further to 2.4% in 2014 (compared with 4.0% in 2013).

Despite growth in the major sectors, fiscal conditions remained weaker than expected owing to both shortfalls in revenue and overruns in current expenditure.

Meanwhile, reflecting the high budget deficits recorded over the past years, the total debt of the government reached 65% of GDP at the end of 2014, with domestic debt accounting for 65% of total public and publicly guaranteed debt.

Outlook for 2015

Against the background of a positive outlook for the external economic environment, the Maldivian economy is expected to expand further in 2015. However, the projections made in 2014 by the National Bureau of Statistics that the real GDP would expand by 10.5% are now being revised to a more modest increase, due to recent downward revision made to the tourism sector growth forecasts for 2015.

The fiscal deficit is projected to decline by 0.4 percentage points of GDP to 3.0% of GDP in 2015. The reduction in fiscal deficit stems from increasing revenue by raising import duty from zero-rated items and duty hikes on vehicles. Significant revenues are expected from the acquisition of land for Special Economic Zones and licences for new resorts. Expenditure reducing measures for 2015 aim to contain current spending, and include a public employment freeze and expenditure savings from the rationalisation of subsidies.

Despite the projected increase in economic activity, import growth is expected to slow in 2015, reflecting low global prices. Meanwhile, fish exports are projected to remain weak during the year.

To download a full copy of the report, visit the MMA website http://www.mma.gov.mv/mmr/AR14.pdf