Tourism slowdown hampers economic growth as forecast downgraded
Finance Ministry noted that GDP growth this year is expected to be lower than previously forecast due to a slowdown in the tourism and construction industries.
By
Ahmed Naif
The economy will not grow as much as expected this year, according to the latest estimates from the Ministry of Finance.
The Ministry of Finance released its latest economic data paper, "Macro Economic Update" report last week. According to the report:
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When the budget was drafted this year, the economy was expected to grow at 5.5%
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However, the latest estimates show that GDP will grow by 4.9% this year
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Therefore, this is 0.6% points lower than the first forecast for this year
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The forecast for the economy this year is better than the forecast for last year; last year, economic growth was 4%
In the report, the Finance Ministry noted that GDP growth this year is expected to be lower than previously forecast due to a slowdown in the tourism and construction industries.
Other reasons for the slowdown in economic growth are changes in state revenue and expenditure policy this year; especially the review of subsidies and changes in the implementation of structural development projects
Tourism will slow down but revenue will improve
The report notes that the tourism sector is expected to grow at a slower pace this year than previously forecast. Thus:
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Tourism growth is now expected to be 6.8% in the medium term
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When the budget was formulated this year, tourism was expected to grow at 8.6%
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Therefore, tourism growth will be 1.8% points lower this year than previously forecast
The main reason for the slowdown in growth is the decline in the number of days spent by tourists at resorts and the number of tourists coming to resorts. In addition:
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The decline in tourist arrivals from the Indian market, which is a major tourist destination for Maldives, is also a reason
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Political rivalry or geopolitics among regional countries was also cited as a reason
The report noted that when the budget was calculated this year, tourists were expected to spend 7.1 days at the resorts. However, it is now calculated to average 6.8 days this year.
Tourism growth is expected to slow down this year, but the economy is expected to generate more revenue from tourism this year than last year. The report includes statistics such as:
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Tourism will contribute MVR 21.9 billion to GDP this year
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This is an increase of 6.1% over the previous year
The report also said that the estimate of 2 million tourists to Maldives this year will be maintained due to the increase in tourist arrivals from China.
A major slowdown in the construction sector
The report noted that the construction sector was initially forecast to grow at 3.7% this year. However, the construction sector is now expected to grow at 0.7% this year. The report cited as reasons:
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Suspension of some development projects under fiscal reform measures
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Import of construction materials declined in the first quarter of this year
However, the report predicts that the construction sector will grow in the medium term.
