Maldives to see fastest growth in South Asia in 2023: World Bank

Maldives economic growth is expected to moderate this year after a post-pandemic boom, but the country will still have the highest growth in the South Asian region, World Bank said Wednesday.

The international development institution downgraded almost all of its forecasts for advanced economies in the world, cutting its growth outlook for the global economy to 1.7% for 2023, it said in its latest report, Global Economic Prospects.

The Washington-based development bank said Maldives economic growth is expected to moderate to 8.2% in 2023, which is below previous projections of 12.4%, as the post-pandemic boost fades.

"Nonetheless, Maldives is expected to remain the fastest growing economy in the region, benefiting from an increase in tourist arrivals and infrastructure investments," the report read.

But the World Bank identified several challenges to the Maldivian economy including the heavy reliance on State-Owned Enterprises (SOEs) and high debt levels.

"State-owned enterprises are also prevalent in small states, operating in sectors such as energy generation, transport, and water, and comprise significant shares of GDP in some countries (for example, Cabo Verde, Maldives, Mauritius, the Federated States of Micronesia, the Seychelles, and St. Kitts and Nevis; Heller 2022)," the report read.

Rising interest rates will also squeeze non-interest spending in small states with sizeable existing stocks of variable rate debt such as the Maldives.

Meanwhile, eight small states including the Maldives are among the 20 countries with the highest estimated stocks of debt owed to entities in China as a share of their GDP.