The World Bank’s Country Director for the Maldives, Sri Lanka, and Nepal, Faris H. Hadad-Zervos has stated that the Maldivian economy has recovered well after the COVID-19 pandemic.
Faris. H. Hadad-Zervos made these remarks during an interview with local media Dhauru. He stated that the Maldivian economy recovered well due to three main reasons. They are:
- The main sector of the Maldivian economy: tourism development improving significantly.
- Tourist arrivals to the Maldives having increased by 60% compared to the same period last year.
- Tourist arrivals to the Maldives are expected to increase compared to the set target this year.
Faris said that the development of tourism has had a positive impact on other sectors of the Maldives as well. Therefore, the World Bank estimates that the Maldivian economy will grow beyond 10% this year.
Faris further said that the biggest concern for the Maldives are the issues faced due to inflation. The inflation, which has remained at an average of 0.5% in the last five years, will increase to 3.5% this year. He said that the World Bank is concerned about the impact of this on Maldivians living in poverty and vulnerability and the high cost of subsidies by the government.
However, the price of basic food items will remain stable in the market as the subsidy is being given, and so the true impact of inflation will be less, he said. Faris also noted that the impact of inflation on the poor has been significantly reduced in the Maldives. He further stated that the Maldives still has the opportunity to take additional measures to reduce demand-side inflation as interest rates within the country remain low. Faris said the government’s recent measures to reduce expenditure will help overcome the difficulties faced due to inflation.
When asked about the government’s recent policy of GST and TGST, Faris said that increasing GST and TGST is a good policy that will help improve the financial situation of the Maldives, reduce debt vulnerability, reduce heavy debt dependency, and increase spending on priority sectors. “It’s a good start,” he said.
Regarding reports that raising the TGST rate could adversely affect Maldivian tourism, Faris said the World Bank does not believe it will have a significant impact on tourism. He said the reason was that the Maldives is a high-end and wealthy tourist destination.