Unlike rest of the world, Maldives economy will grow faster: MMA
Electricity bills will see a hike as electricity subsidy will be given to only the needy.
By
Ahmed Naif
The central bank, Maldives Monetary Authority (MMA), has predicted that the country's economy will grow at a fast pace this year and the next year despite the global crisis and challenges.
MMA’s economic bulletin for the third quarter of the year which was released on Thursday said that the country's economic growth was 12.3% this year when economic growth was revised in October. By the end of the year, the country will be able to return to its pre-Covid level of economic growth, the report said.
Here are some of the highlights of the report:
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The latest data shows that the economy will grow at 7.6% next year
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This is the level of economic growth even before Covid-19
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This year, the economy grew on the back of improved tourism; tourist bed nights grew by 33%
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Tourism growth will continue to be the same next year as well
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The current concern is the increase in the cost of imports; it has increased from $2.4 billion to $3.2 billion
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As a result, the balance-of-payment deficit stood at $167.4 million
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As a result, the official reserves were expected to fall to $638.4 million
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However, the current account deficit debt could be reduced to 15% in 2023 as oil prices will fall and tourism growth will be sustained
Inflation trends worrying; could rise to 5.4%
The MMA pointed out that inflation or rising commodity prices will be the biggest challenge for the country's economy next year.
The report noted that inflation in the country has remained stable this year. According to the report, inflation has slowed down in the third quarter of the current financial year. Inflation has come down to 2.7% from 2.9%. The average inflation for the current fiscal is 2.25%, the report said.
However, the MMA report expects the country's average inflation to be at 5.4% next year. Apart from rising global commodity prices, the report cited as the reasons for the rise in inflation in the country:
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Increase in commodity prices due to increase in general GST from 6% to 8%
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Electricity bill price hike as electricity subsidy will be given to only the needy
Significant risks
The MMA report noted that the risks or challenges to economic growth in the next financial year are likely to be high. Thus, the report points out:
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Economic recession in Europe
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Difficulty in raising funds from international financial markets due to the scrunching in foreign financial institutions
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Recession worsens debt situation in countries
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More deadly variants of Covid-19 are emerging
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Global crisis likely to worsen commodity and energy markets
"These factors have the potential to reduce tourist arrivals from foreign markets and significantly impact the country's economic growth," the MMA report noted.
However, the MMA expects tourist arrivals from China and Asia to increase next year due to China's easing of their strict border policy in the wake of the Covid-19 pandemic. If that happens, the report noted, the decline in the number of tourists from Europe would be compensated for.
"If this happens, there is a possibility that the country's economy will recover next year even better than expected," the MMA report noted.
