The nation’s growth outlook will be lower than expected this year, the Ministry of Finance projected in its Macro Economic Update released last week.
When the 2024 budget was drafted, the economy was expected to grow by 5.5 percent, however, the Ministry’s latest estimates show that GDP is expected to be at 4.9 percent this year, 0.6 percentage points lower than the initial forecast — forecasts for 2024 still maintained a better growth outlook compared to the 4.0 percent growth for last year.
In the Report, the Ministry attributed the lower projected growth to expectations that the tourism and construction industries will experience a slowdown this year.
Changes to state revenue and expenditure policy this year, especially the review of subsidies and changes in the implementation of development projects, is also expected to slow down growth.
Even with the projected slowdown in tourism, revenue was still expected to increase. The Report notes that the tourism sector is expected to grow at a slower pace this year than previously forecast.
Tourism growth is now expected at 6.8 percent in the medium term, a figure that had been projected at 8.6 percent when the 2024 budget was drafted; a 1.8 percentage point reduction over previous forecasts.
The main reason for the tourism slowdown is the decline in the number of days spent by tourists at resorts and the number of tourists staying at resorts. The decline in tourist arrivals from India, which has been a major tourist market, is also a contributing factor.
Geopolitical tension among regional countries was also cited as a reason for the projected downturn.
The Report noted that when the 2024 budget was formulated, tourists were expected to spend 7.1 days at the resorts. This estimate has now been revised to 6.8 days.
Even as tourism growth is expected to slow down, the economy is expected to generate more revenue from tourism this year than last year.
According to the Report, tourism is projected to contribute MVR 21.9 billion to the GDP this year; an increase of 6.1 percent over the previous year.
The report also noted that the estimated target of two million tourists expected to visit the Maldives this year would be reached due to the increase in arrivals from China.
On the construction sector the Report noted that, while it was initially projected to grow 3.7 percent this year, the sector is now projected to grow 0.7 percent. The suspension of some development projects, under the administration’s fiscal reform measures, and the decline in imports of construction materials were cited as the main reasons for the construction sector slowdown.
The Report, however, does predict that the construction sector will grow in the medium term.
