Demand shift from resorts to cheaper guesthouses hampers Maldives' GDP growth

World Bank has downgraded Maldives' output growth forecasts due to a shift in tourism activity from high-end resorts to toward lower-cost guesthouses.

In its latest South Asia Development Update, the World Bank said output growth in Maldives is expected to rise to 4.7 percent in 2024, a 0.5 percentage point downgrade from previous forecasts.

"...that partly reflects a shift in tourism activity from high-end resorts toward lower-cost guesthouses," the report said.

The report said growth is expected to strengthen further to 5.2 percent in 2025, on the assumption that the extension of the Velana International Airport will be completed.

The extension is expected to also result in continued wide current account deficits, at around 20 percent of GDP, and a double-digit fiscal deficit in 2024, World Bank said.

Government debt well in excess of GDP and a significant external debt service burden continue to raise concerns about debt sustainability, the report added.

According to the World Bank, Maldives' economy grew by 2 percent year on-year in 2023 Q3, a significant slowdown from

the 13.9 percent growth of 2022.

Tourism activity contracted by 5 percent in the year to 2023Q3, the second consecutive quarterly contraction, as tourists increasingly shifted from high-end resorts to lower-end guesthouses, the report said.