MMA Reports Maldives Economic Moderation in Q4 2023; Fiscal Spending Increases

New data released by the Maldives Monetary Authority (MMA) shows economic activity in the Maldives slowed in the fourth quarter of 2023. This follows a 2.0% annual GDP growth rate observed in Q3 of 2023.

The Q4 slowdown was primarily attributed to contractions in the transportation, communication, and tourism sectors. Notably, the tourism sector saw a drop in resort bednights, although a total increase in bednights driven by rising guesthouse stays helped offset the decline. High-frequency indicators also show a mixed performance in the fisheries industry throughout the quarter.

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Despite the moderation, other segments of the economy provided some support. The construction sector expanded, while wholesale and retail trade displayed a more muted growth path.

Inflation Eases, Fiscal Concerns Rise

The rate of inflation, tracked by the national Consumer Price Index (CPI), dropped to 2.3% in Q4 2023, down from 2.5% in the third quarter. This was largely due to reduced costs in information and communication services, as well as a slower increase in household-related expenses. However, food inflation and rental prices remained significant contributors to overall cost pressures.

On the fiscal front, government revenue (excluding grants) rose during Q3 2023, supported by higher tax revenues. Conversely, non-tax revenue dipped during the same period. Total expenditure, excluding debt amortisation, also increased. This rise was driven by higher capital expenditure on infrastructure and a growth in recurrent expenditure related to administrative and operational costs.

External Factors Present a Challenge

Annual growth in broad money supply slowed during the quarter to 7% at the end of December 2023. This was a result of decreased net foreign assets (NFA) and a slowdown in net domestic assets (NDA). Merchandise exports grew overall due to rising re-exports, but domestic exports fell, led by lower frozen skipjack tuna earnings. Imports saw a slight annual decline.

The Maldives Monetary Authority will continue to monitor the evolving economic situation, with further insights likely within the next Quarterly Economic Bulletin.

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