The Maldives Monetary Authority’s Quarterly Economic Bulletin for Q3 2024 highlights a mixed performance in the construction sector. While the sector grew by 1.6% compared to the same period in 2023, this expansion occurred alongside a notable 4% decline in imports of construction-related materials. Instead of traditional drivers like material imports, this growth was primarily supported by a robust 15% increase in commercial bank credit to the construction sector, which fuelled projects ranging from residential developments to resort renovations.
The data indicates a shift in how the construction sector is being financed, with credit serving as a critical enabler for ongoing projects. This includes property development initiatives, resort refurbishments, and residential housing projects, which saw a surge in financing. However, loans for new resort developments and guesthouses declined, reflecting a potential shift in investment priorities.
The contrast between declining imports and credit-driven growth raises questions about the sustainability of the sector’s expansion. A continued reliance on credit could expose vulnerabilities if interest rates rise or lending conditions tighten. Additionally, the decline in imports of construction materials may signal changes in project scope, possibly moving towards smaller-scale developments or the use of locally sourced materials.
As the Maldives continues its economic recovery, the construction sector’s trajectory will depend on how effectively it balances credit utilisation with material supply and investment diversification. This dynamic underscores the need for targeted policies to support long-term growth while mitigating risks associated with shifting financing trends.
