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Maldives economy to recover despite global economic slowdown: MMA

Mohamed Rehan
04 December 2022, MVT 12:45
Maldives central bank projected the country's economic recovery will maintain its trajectory in 2023 as well-- Photo: Mihaaru
Mohamed Rehan
04 December 2022, MVT 12:45

Maldives Monetary Authority (MMA), the central bank of the nation, reports the island nation's recovery will maintain its trajectory in 2022 and in 2023, despite negative global hindrance.

According to MMA, the domestic economy is estimated to grow by 12.3 percent and reach pre-pandemic levels of output by the end of current year.

According to MMA, economic growth projections for the Maldivian economy is a result of strong performance of the tourism sector. The central bank highlights tourist bed nights had grown by 33 percent in the first three quarters of 2022, and the sector is expected to see additional growth rates next year.

The country's Gross Domestic Product (GDP) is expected to increase by 7.6 percent in 2023 which is higher than the average pre-pandemic economic growth rate.

The Quarterly Economic Bulletin by MMA, also note that despite strong recovery of tourism receipts in 2022, the current account deficit for the year is expected to widen to 18 percent of the GDP this year from 8 percent in 2021. This was owed to the significant increase in imports.

MMA reported import expenses increased due to surge in global commodity prices, particularly oil, with the total expenditure on merchandize imports expected to increase from USD 2.4 billion in 2021 to USD 3.2 billion in 2022. Central bank further claimed that during the current fiscal year, current account deficit will likely be financed primarily by foreign direct investment (FDI) inflows, drawing on commercial bank deposits abroad and borrowings by the state government and the private sector.

The current account deficit is expected to exceed the overall financial account position during 2022, and the overall balance payment is anticipated to record a deficit of USD 167.4 million.

Owing to this the Gross International Reserves (GIR) is expected to drop to USD 638.4 million in 2022 from USD 805.8 million in 2021.

MMA had suggested that with moderation of oil prices expected for 2023 along with forecast growth for Maldives tourism sector and the overall economy, the current account deficit is expected to narrow to 15 percent of the GDP by the end of 2023.

Meanwhile, the domestic inflation rate moderated slightly from 2.9 percent in 2022 second quarter to 2.7 percent during the third quarter of this year. Sustained inflationary pressures from higher global commodity prices, is expected to push the domestic inflation high in 2022 and average at 2.2 percent for the year.

Tax hikes; mainly the increase in General Goods and Services Tax (GGST) in 2023 from 6 to 8 percent, and transition to a more targeted fuel and electricity subsidy policy, along with high global inflation rates, will accelerate the domestic inflation rate to 5.4 percent in 2023.

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