The Maldives Monetary Authority (MMA) has released its November 2024 Economic Update, revealing a tempered economic growth trajectory. According to the report, real GDP expanded by 4.5% in the second quarter of 2024, a significant deceleration from the 7.7% growth recorded in the first quarter. This slowdown is primarily attributed to declines in key sectors such as fisheries, construction, and manufacturing, which contrast with gains in public administration, transportation, tourism, and real estate.
Tourism Drives Growth Despite Operational Challenges
Tourism continues to be a vital driver of the Maldivian economy, with a 10% year-to-date increase in arrivals through October, largely fueled by strong performances in European and Chinese markets. However, the sector faced setbacks, with bednights declining by 6% and 41% for guesthouses and hotels, respectively. Resorts, on the other hand, experienced modest growth. The sector also saw a slight reduction in operational bed capacity compared to the same period in 2023.
Inflation and Consumer Spending
The inflation rate remained stable at 1.1% in October, primarily driven by rising fish and vegetable prices. A slight monthly decline in consumer prices reflected varied shifts in essential goods and services, indicating a balanced inflationary environment.
Public Finance and Debt Dynamics
The report highlights an increase in government revenue by 20% year-on-year in March 2024, mainly due to higher tax revenue. Non-tax revenue, however, decreased. Expenditure rose modestly by 3%, with recurrent spending outpacing capital investments. Government debt as a percentage of GDP fell from 103% at the end of 2023 to 98% in Q1-2024, despite a marginal uptick in total debt, driven by domestic borrowing.
Mixed Trade Performance and Reserves Recovery
Exports in October 2024 declined by 29% year-on-year, primarily due to reduced earnings from tuna and re-export categories. Imports, on the other hand, grew by 2%, driven by transport equipment and food items, while construction materials and petroleum imports declined. Despite the mixed trade performance, gross international reserves surged to USD 614.6 million by the end of October, marking a 66% increase from September. This recovery was bolstered by a currency swap with India’s Reserve Bank.
Private Sector Credit and Monetary Developments
Private sector credit expanded by 11%, led by growth in personal loans and tourism-related credit. However, monetary metrics revealed declines in reserve and broad money due to foreign liabilities and shifts in domestic asset allocations.
The update underscores the Maldives’ resilience in navigating economic complexities while highlighting areas for policy intervention to sustain balanced growth. The MMA remains committed to implementing measures that will support continued economic stability and development in the country.
