The Maldives output growth is expected to fall by 0.5% in 2024 as tourists opt for immersive experiences in guesthouses at local islands over high-end luxury resorts, according to forecasts by Jobs for Resilience.
The report which was released today is the latest South Asia Development Update compiled by The Office of the Chief Economist of the South Asia Region. It predicts Maldives output growth in 2024 will be 4.7%, dropping by 0.5% compared to previous forecasts.
The Maldivian economy experienced a notable slowdown in the third quarter of 2023, the report notes, with growth registering a modest 2% year-on-year which is a departure from the robust 13.9% growth observed in 2022.
Tourism activity, the cornerstone of Maldives’ economy, fell by 5% in the year leading up to the third quarter of 2023. This fall marks the second consecutive quarterly decline, attributed to a notable shift in tourist preferences from high-end resorts to lower-cost guesthouses. While this shift presents opportunities for diversification within the tourism sector, it also highlights the need for adaptability and innovation to maintain competitiveness in the global market.
Despite challenges, there are signs of optimism for Maldives and other tourism-dependent countries in South Asia. A gradual recovery in international travel, albeit slower than the global average, has provided a glimmer of hope for growth in the tourism sector.
However, persistently high regional food inflation poses a significant challenge to economic stability, with local supply disruptions contributing to elevated food prices in South Asia.
As such, the growth trajectory is anticipated to strengthen further, reaching 5.2% in 2025, predicated on the completion of the extension project at Velana International Airport. However, this extension is projected to perpetuate wide current account deficits, hovering around 20% of GDP, alongside a double-digit fiscal deficit expected in 2024.
