Maldives’ economy expected to continue recovering despite global downturn: MMA

The economy of Maldives is expected to continue to recover, despite the global economic downturn due to multiple reasons.

This was announced by the Maldives Monetary Authority (MMA) in its quarterly economic bulletin for the third quarter of 2022, publicized on Thursday.

As such, the report states that the archipelago nation’s economy is expected to continue its strong recovery trajectory in 2022 and 2023, despite the global downturn.

The revised forecast of October this year, MMA revealed that the domestic economy is expected to increase by 12.3 percent this year and rise to pre-pandemic levels of output by the end of 2022.

MMA went on to state that the sturdy economic growth projections, mirror the strong performance of the tourism sector during 2022, stating that incoming high frequency data indicate that the tourist stay period grew by 33 percent in the first three quarters of 2022 and the sector is expected to register further growth rates in 2023 as well.

As such, the latest forecast by the authority, shows a real GDP growth of 7.6 percent for 2023 which is higher than the average growth rates registered by the domestic economy prior to the Covid-19 pandemic.

According to projections of October, the current account deficit for the year is expected to go to 18 percent of GDP in 2022 from eight percent in 2021, despite the strong recovery of tourism receipts in 2022. This is owing to the significant increase in the total imports.

MMA goes on to reveal that with the significant hikes in global commodity prices, particularly oil, the total expenditure on merchandise imports is expected to increase from USD 2.4 billion in 2021 to USD 3.2 billion in 2022 during which the current account deficit is expected to be financed primarily by foreign direct investments (FDI) inflows, drawing on commercial bank deposits abroad, and borrowings by the government and the private sector.

In addition, MMA shed light on the activities in the fisheries sector, noting that the activity had observed mixed developments during the third quarter of 2022, like the preceding quarter, according to the available high frequency indicators.

As such, in the third quarter of the year fish purchases made by processing companies fell in annual terms, although the volume of fish exports increased.

Further, the gross value added of the fisheries sector registered a growth of 27.7 percent during this year’s second quarter and exceeded pre-pandemic levels of 2019.

In the third quarter, fish purchases totaled 14,452 metric tons, observing a decline of 19 percent compared to the same period of 2021.

This, MMA revealed was mainly caused by the 53 percent decline in purchases of yellowfin tuna and five percent decline in purchases of skipjack tuna.

The decline in fish purchases mainly reflected the limited purchases made by fish processing companies owing to the limited storage capacity, despite a better-than-expected increase in fish catch from the south, during the quarter.

The report also revealed that the rate of inflation slowed down to 2.7 percent in the third quarter, from 2.9 percent in the second quarter.

Developments in domestic inflation during the quarter mainly reflected higher prices in most of the major food categories, energy-related items, health, transport services, and services of restaurants and cafés, which offset the decline in cost of information and communication services, according to MMA.

MMA added that the cost of domestic food and energy related items have been steadily increasing with the increased global food and energy prices, driven by the demand and supply imbalances and global supply chain disruptions amid the negative spill-over effects from the Russia-Ukraine war.