Maldives Guesthouse, Credit:TTM

Tourism Shift Impacts Maldives' GDP Growth

The World Bank has revised down its growth forecasts for Maldives due to a change in tourism dynamics, with a movement away from high-end resorts towards more budget-friendly guesthouses.

According to the latest South Asia Development Update from the World Bank, Maldives' output growth is projected to reach 4.7 percent in 2024, marking a 0.5 percentage point decrease from previous estimates. This adjustment is attributed in part to the shift in tourism activity towards lower-cost accommodations.

The report anticipates a further strengthening of growth to 5.2 percent in 2025, contingent upon the completion of the Velana International Airport extension.

However, the extension is expected to contribute to ongoing wide current account deficits, reaching approximately 20 percent of GDP, as well as a double-digit fiscal deficit in 2024, according to the World Bank.

Concerns persist regarding the high level of government debt exceeding GDP and the substantial burden of external debt service, posing challenges to debt sustainability.

In 2023 Q3, Maldives' economy saw a 2 percent year-on-year growth, a significant deceleration from the 13.9 percent growth recorded in 2022. Tourism activity experienced a contraction of 5 percent in the same period, marking the second consecutive quarterly decline, as tourists increasingly favored lower-cost guesthouses over high-end resorts.