World Bank Forecasts Maldives Economy

Sunday 12th of April 2020

World Bank Forecasts Maldives Economy

According to Economic Impact of Covid19 on South Asia by World Bank, Maldives economic growth is estimated to decline by 8.5 percent in 2020 as the COVID-19 outbreak dampens tourism and construction.

The current account deficit will improve as remittance outflows and imports decline, more than offsetting the contraction in exports. The decline in capital expenditures is not expected to cover for the loss in tourism revenues, leading to an increase in fiscal deficit and public debt. Poverty is expected to increase as livelihoods are heavily linked to tourism and fisheries.

Real GDP is expected to contract by 8.5 percent in 2020, 13.9 pp lower than the baseline (pre-COVID-19). This is mostly due to the slump in tourism, which directly and indirectly accounts for two-thirds of GDP, but also due to suppressed construction activity.

Decline in tourism also decreases employment and household earnings, as one-third of adult males and a quarter of females are engaged in tourism-related jobs. Lower-income households that depend on fisheries are also affected as exports of raw fish have ceased due to weak demand. A larger impact is expected in the atolls, as there is greater dependence on fisheries and the poverty rate was already higher.

World Bank states that the key short-term challenge is to contain the spread of COVID-19 while trying to limit the economic repercussions. While in the medium term, it is critical to build stronger fiscal buffers and more resilience to macroeconomic shocks, it is also important to enable the expansion of a more vibrant private sector that can create more and better jobs. This is especially for the growing working-age population.