Inflation saw a significant downturn in the first quarter of 2024, according to the Maldives Monetary Authority’s (MMA) latest Quarterly Economic Bulletin. Published today, the report reveals a notable deceleration in inflation, with rates plummeting to a mere 0.6% in Q1-2024, down from 2.3% in the previous quarter.
The GDP growth of 4.0% observed in Q4-2023 continued its momentum, primarily driven by the robust performance of the tourism sector and related industries such as transportation, communication, and wholesale and retail trade.
Inflation
MMA states the sharp decline in inflation can be primarily attributed to reduced prices of energy-related items and a moderation in the pace of restaurant and accommodation services costs.
According to the report, positive contributions to inflation came from elevated food inflation and certain service costs, while negative contributions stemmed from declines in information and communication service costs, along with energy-related item prices.
While the overall inflationary trend paints a positive picture for consumers, the report also highlights disparities across various sectors. The tourism sector notably experienced robust growth, buoyed by a surge in tourist arrivals, while the fisheries sector faced significant challenges, witnessing a contraction in activity during the same period.
Fiscal and Monetary Dynamics
Fiscal dynamics revealed a mixed picture, with total government revenue (excluding grants) witnessing an annual increase in Q4-2023, driven by growth in tax revenue despite a decline in non-tax revenue. However, total expenditure saw a significant uptick, led by a rise in recurrent expenditure offsetting the decline in capital expenditure.
Monetary indicators reflected a decline in reserve money and a deceleration in broad money growth, primarily driven by a slowdown in net domestic assets (NDA) growth despite a decrease in net foreign assets (NFA). The decline in NFA was attributed to reduced foreign asset accumulation and commercial banks’ foreign currency deposits.
External Sector
In the external sector, the merchandise trade deficit widened to USD768.5 million in Q1-2024 from USD669.3 million in Q1-2023. While total merchandise exports declined due to reduced domestic exports, merchandise re-exports increased. On the other hand, merchandise imports increased, driven by growth in most major import categories, despite a decline in construction-related imports.
