In October last year it was estimated by the Ministry of Finance and Treasury that the GDP of the country would be up to 6.4% this year. the basis for these estimates were the expected growth in he construction industry due ti the multiple infrastructural projects that are commencing and to be commenced in this year. The tourism sector was also expected to see a growth with the aid of the Visit Maldives Year 2016 promotions however the katest data and analytics have shown a decrease.
The country’s fiscal deficit is projected to decrease to $3.4 billion from an estimate of $3.6 billion from last year. Furthermore, the current account deficit is estimated to widen from last year’s $295.5 million to this year’s $367.2 million.
During July 2016, total tourist arrivals increased in both monthly and annual terms by 40% and 6%, respectively, and totalled 110,432. The annual growth in tourist arrivals was on account of a significant rise in arrivals from Europe which oﬀset the decline in arrivals from China. In July 2016, total bednights registered a growth of 7% in annual terms while the average duration of stay marginally increased to 5.3 days. Meanwhile, reflecting the increase in operational bed capacity, the occupancy rate of the industry fell marginally to 66% in July 2016 from 67% in July 2015.
In August 2016 fish purchases made by collector vessels from local fishermen increased to 2,751.5 metric tonnes registering a growth in both monthly and annual terms by 71% and 8%, respectively.
In July 2016, both the volume and earnings of fish exports declined in annual terms by 15% and 31%, respectively. This was mainly due to the decline in both the volume and earnings of fresh or chilled yellowfin tuna and canned or pouched tuna exports.
During August 2016, the International Monetary Fund commodity price index registered a decline of 2% in annual terms. This was due to the annual decline in petroleum prices which oﬀset the increase in food and metal prices. Meanwhile, in monthly terms, the commodity price index remained largely unchanged despite the increase in both petrol and metal prices, and the decrease in food prices.
The price of crude oil increased in monthly terms by 1% while it declined by 2% in annual terms and stood at US$44.8 per barrel at the end of August 2016.
The rate of inflation (measured by the annual percentage change in the Consumer Price Index [CPI] for Male’) declined to 0.4% at the end of August 2016 after registering a growth of 0.1% at the end of July 2016. This was largely driven by the decline in food prices, especially the decline in fish prices. In addition, the slowdown in the increase in prices of major household appliances also contributed to the overall decline in inflation.
As for the monthly percentage change in the CPI, it registered a negative 0.3% in the review month after registering 0.3% at the end of July 2016. This was due to the monthly fall in prices of fish, furniture and household appliances.
According to monthly government revenue and expenditure data for August 2016, total revenue (excluding grants) decreased annually by MVR426.0 million and totalled MVR1.2 billion in August 2016. Meanwhile, total expenditure (excluding net lending and amortisation) increased by MVR41.3 million in annual terms and amounted to MVR1.8 billion in August 2016. The fall in total revenue was driven by a decrease in both tax and non-tax revenue. The decline in tax revenue was largely owed to a fall in business profit tax, while the decline in non-tax revenue was mainly due to a decrease in resort lease extension fees. As for the increase in expenditure, this was entirely driven by higher capital expenditures. The decline in current expenditure mainly included a fall in expenditure on operational services, interest payments and allowances.
The total outstanding stock of government securities, which includes treasury bills and treasury bonds, increased in both monthly and annual terms by 2% and 14%, respectively and amounted to MVR21.5 billion at the end of August 2016. The annual growth in the outstanding stock of government securities was owed to a growth in the outstanding amount of both treasury bills and treasury bonds which rose by 12% and 18%, respectively. In monthly terms, the increase was due to a growth in the outstanding amount of treasury bonds while treasury bills registered a marginal decline.
The annual growth in treasury bills was entirely contributed by a 28% increase in treasury bills holdings by commercial banks. However, the monthly decline in treasury bills was largely on account of a fall in treasury bills held by public non-financial corporations and other financial corporations.
As for treasury bonds, the monthly and annual increase reflected the conversion of part of the treasury bills held by the pension fund to treasury bonds in the review month. Furthermore, the issuance of a treasury bond to a commercial bank within the past year also contributed to the annual growth in treasury bonds.
INTEREST RATE OF TREASURY BILLS
Treasury bills of all maturities continue to be issued under a tap system since they were reverted back in the year 2014. In November 2015, the rates on treasury bills of all maturities were eﬀectively lowered. As a result, the weighted average interest rates on 28-, 91-, 182- and 364-day treasury bills remained unchanged in monthly terms during August 2016, while it registered declines of 400, 413, 427 and 440 basis points in annual terms and stood at 3.50%, 3.87%, 4.23% and 4.60%, respectively.
The annual broad money (M2) growth remained unchanged at 8% at the end of August 2016 and stood at MVR31.9 billion. This reflected the deceleration in the net domestic assets (NDA) of the banking system which was oﬀset by a slowdown in the rate of decline in net foreign assets (NFA). The deceleration in the growth of NDA was mainly due to a slowdown in commercial bank credit to the private sector, which registered an annual growth of 18% at the end of August 2016 compared with 20% recorded at the end of July 2016. As for the annual decline in the NFA of the banking system, it largely reflected a decline in the NFA of MMA. Meanwhile, the NFA of the commercial banks registered an increase due to a growth in foreign asset accumulation by commercial banks.
The monetary base (M0) contracted by 11% in annual terms to MVR9.7 billion at the end of August 2016, after registering a decline of 15% at the end of July 2016. The decline in M0 was entirely due to the annual contraction in the NFA of the MMA which oﬀset the growth in the NDA of the MMA. The decline in NFA resulted from an annual increase in foreign currency liabilities of the MMA. Meanwhile, the annual growth in NDA of the MMA during August 2016, was due to a slowdown in the growth of Overnight Deposit Facility (ODF) placements by commercial banks.
The two main instruments available to the MMA to absorb excess liquidity in the banking system are the ODF and the open market operations (OMO). However, as the OMO continue to remain suspended since May 2014, the MMA relies entirely on ODF to absorb excess liquidity in the banking system. In August 2016, the total liquidity absorbed averaged MVR2.9 billion, which was a decline of MVR112.7 million compared with the previous month and a growth of MVR598.2 million when compared with August 2015.
IMPORTS AND EXPORTS
During July 2016, merchandise exports (f.o.b) declined in annual terms by 31%, while the expenditure on imports registered a slight increase of 2%. The decline in merchandise exports was on account of a decline in both re-exports and domestic exports. The decline in domestic exports was due to a fall in earnings from fresh or chilled yellowfin tuna exports and, canned or pouched tuna exports. Meanwhile, the growth in imports was mainly due to an increase in the import of machineries and mechanical appliances.
GROSS INTERNATIONAL RESERVES
Gross international reserves (GIR) stood at US$532.5 million at the end of August 2016, of which usable reserves7 amounted to US$186.1 million. Usable reserves registered a decline of 10% and 15% in both monthly and annual terms, respectively. The annual decline in usable reserves was largely attributable to the increase in MMA’s foreign currency sales.
With eﬀect from 11 April 2011, the Maldivian rufiyaa was allowed to fluctuate within a horizontal band of 20% on either side of a central parity of MVR12.85 per US dollar. However, immediately after the introduction of the exchange rate band, the exchange rate of the rufiyaa per US dollar moved towards the upper limit of the band and since then it has remained virtually fixed at MVR15.42 per US dollar.
Mirroring the movements of the US dollar during August 2016, the bilateral exchange rates of the rufiyaa appreciated in annual terms against the Indian rupee, the Sri Lankan rupee, the pound sterling, the euro and the Chinese yuan, while it depreciated against the Singapore dollar. As for the monthly changes, the rufiyaa appreciated against the Singapore dollar, the Indian rupee, the pound sterling and the Chinese yuan, while it remained largely unchanged against the Sri Lankan rupee and the euro.