IMF Executive Board Concludes 2017 Article IV Consultation with Maldives
IMF News, November 16, 2017
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- Published: November 16, 2017
Economic performance and recent developments
- Growth drivers: "high-end tourism and construction."
- Real GDP growth:
- 2014: 7.6
- 2015: 3.3
- 2016: 3.9
- 2016 inflation (period average): 0.8
- Fiscal outcome:
- Fiscal deficit widened in 2016 driven by lower-than-expected revenue and large arrears clearance despite unchanged current spending.
- Public debt as a share of GDP rose nearly 11.5 percentage points from 2014-16.
- Monetary and financial conditions:
- Monetary policy remains accommodative.
- Private sector credit has grown rapidly, led by the housing and construction sectors.
- External sector:
- Current account deficit: widened sharply to 19.6 percent of GDP in 2016, driven by increased infrastructure-related imports, moderating tourism receipts, higher remittance outflows, and a large one-off court mandated payment.
Outlook and risks
- Near-term outlook: strengthening recovery in the near term with low inflation and loose financial conditions.
- Growth projections and drivers:
- Growth projected to recover in 2017 and stabilize over the medium term, benefiting from infrastructure scale up, continued recovery in Europe, and favorable tourism trends.
- Deficits and debt trajectory:
- Both fiscal and current account deficits projected to gradually decline over the medium term after widening in 2016, as infrastructure spending winds down.
- Main challenge: balancing a surge in infrastructure investment with the risks from high and increasing public debt.
- Downside risks: significant downside risks from a fragile fiscal and external position.
Executive Board assessment and policy recommendations
- Overall assessment:
- Directors welcomed economic improvement supported by tourism and construction and a positive medium-term outlook.
- Directors noted rapid buildup in debt, widening current account deficit, and low international reserves amid limited policy space.
- Fiscal policy priorities:
- Decisive fiscal adjustment needed to restore fiscal and debt sustainability and reduce external imbalances.
- Consolidation should focus on implementing revenue measures, containing current spending, and prioritizing investment projects.
- Encourage careful assessment of risks of excessive debt linked to infrastructure investment.
- Welcomed intention to introduce user fees for key infrastructure and steps to recover tax arrears.
- Strengthen public financial management, including developing an annual borrowing plan as part of the approved medium-term debt strategy.
- Encourage reliance on concessional financing.
- Exchange rate, monetary, and financial policy:
- Stabilized exchange rate arrangement viewed as appropriate.
- Strong fiscal adjustment, combined with a tighter monetary stance and more flexibility in the pegged regime, could better support the peg and help build foreign reserves.
- Recommended gradual tightening of the monetary stance so as not to impede credit in support of economic growth.
- Welcomed efforts to foster financial inclusion and improve the regulatory environment.
- Structural and climate-related recommendations:
- Continue investments to address climate change, reduce congestion, and lower costs for basic services.
- Structural reforms to expand investment in electricity generation, renewable energy, and waste management.
- Integrate risk-reduction and disaster-response programs into the core budget and public investment planning.
- Improve accuracy and timeliness of national statistics.
Key statistics (selected figures from Table 1)
- Population (in 1,000; 2015): 348
- GDP per capita (in U.S. dollars; 2015): 11,544
- Quota (in million SDRs, Feb 2016): 21.2
- Inflation (end-of-period) series:
- 2014: 1.2
- 2015: 1.8
- 2016: 2.1
- 2017: 2.2
- 2018: 2.4
- 2019: 2.6
- Inflation (period average) series:
- 2014: 2.5
- 2015: 1.4
- 2016: 0.8
- Central government finances (percent of GDP):
- Revenue and grants: 2014: 26.7; 2015: 27.7; 2016: 28.4; 2017: 28.7; 2018: 28.6; 2019: 28.3; 2020: 28.5
- Expenditure and net lending: 2014: 34.1; 2015: 34.5; 2016: 38.7; 2017: 36.6; 2018: 35.7; 2019: 34.7; 2020: 34.3; 2021: 33.9; 2022: 32.9
- Overall balance: 2014: -7.4; 2015: -6.8; 2016: -10.3; 2017: -8.0; 2018: -7.1; 2019: -6.3; 2020: -6.0; 2021: -5.3; 2022: -4.3
- Overall balance excl. grants: 2014: -7.7; 2015: -7.8; 2016: -10.6; 2017: -8.2; 2018: -6.5; 2019: -6.2; 2020: -5.5; 2021: -4.4; 2022: -4.3
- Primary balance: 2014: -5.1; 2015: -4.6; 2016: -5.8; 2017: -3.3; 2018: -2.6; 2019: -1.9; 2020: -0.9
- Current primary balance: 2014: -0.1; 2015: 5.2; 2016: 6.3; 2017: 5.7; 2018: 4.9; 2019: 5.4; 2020: 5.8
- Public and publicly guaranteed debt (% of GDP): 2014: 54.2; 2015: 56.9; 2016: 65.7; 2017: 69.4; 2018: 72.0; 2019: 73.5; 2020: 74.3; 2021: 73.2
- Broad money (annual % change): 2014: 14.7; 2015: 12.3; 2016: -0.2; 2017: 9.6; 2018: 9.7; 2019: 9.9; 2020: 10.5; 2021: 10.6
- Domestic credit (annual % change): 2014: 15.7; 2015: 19.5; 2016: 7.1; 2017: 7.8
- Current account (percent of GDP): 2014: -3.2; 2015: -7.3; 2016: -19.6; 2017: -17.2; 2018: -17.0; 2019: -16.4; 2020: -14.3; 2021: -12.9
- Tourism receipts (in nonfactor services, net, percent of GDP): 2014: 73.0; 2015: 63.9; 2016: 59.3; 2017: 59.2; 2018: 59.1; 2019: 59.4; 2020: 59.7; 2021: 60.0
- Exports (percent of GDP): 2014: 8.1; 2015: 6.0; 2016: 6.6; 2017: 6.9; 2018: 7.2; 2019: 7.5
- Imports (percent of GDP): 2014: -53.1; 2015: -47.2; 2016: -49.5; 2017: -52.5; 2018: -53.8; 2019: -52.8; 2020: -51.2; 2021: -50.4; 2022: -47.4
- Income (net, percent of GDP): 2014: -9.6; 2015: -8.1; 2016: -8.6; 2017: -8.9; 2018: -9.2; 2019: -9.3; 2020: -9.5; 2021: -9.7
- Current transfers (percent of GDP): 2014: -8.3; 2015: -15.0; 2016: -8.5
- Capital and financial account (including e&o, percent of GDP): 2014: 10.1; 2015: 6.1; 2016: 17.4; 2017: 19.4; 2018: 18.0; 2019: 17.0; 2020: 15.3; 2021: 13.7
- General government, net (percent of GDP): 2014: -0.5; 2015: 3.1; 2016: 3.5; 2017: 3.7; 2018: 3.4; 2019: 3.2
- Banks and other sectors, net (percent of GDP): 2014: 6.7; 2015: 1.7; 2016: 4.1; 2017: 3.6; 2018: 6.8; 2019: -1.2; 2020: -2.2; 2021: 1.0; 2022: 0.6; 2023: -0.4
- Gross international reserves (in millions of US$; e.o.p.) 2/:
- 2014: 615
- 2015: 546
- 2016: 468
- 2017: 564
- 2018: 614
- 2019: 645
- 2020: 703
- 2021: 751
- 2022: 724
- Gross international reserves (in months of GNFS imports): 2.7 (2014); 1.9 (2015)
- Memorandum items:
- GDP (in millions of rufiyaa): 2014: 56,867; 2015: 61,869; 2016: 65,310; 2017: 69,648; 2018: 74,349; 2019: 79,488; 2020: 85,446; 2021: 91,932; 2022: 98,913
- GDP (in millions of U.S. dollars): 2014: 3,690; 2015: 4,015; 2016: 4,238; 2017: 4,520; 2018: 4,825; 2019: 5,162; 2020: 5,545; 2021: 5,966; 2022: 6,419
- Tourism bednights (000'): 2014: 7,290; 2015: 6,977; 2016: 7,138; 2017: 7,460; 2018: 7,795; 2019: 8,154; 2020: 8,602; 2021: 9,076; 2022: 9,575
- Tourist arrivals (000'): 2014: 1,205; 2015: 1,234; 2016: 1,286; 2017: 1,356; 2018: 1,417; 2019: 1,483; 2020: 1,564; 2021: 1,650; 2022: 1,741
- Dollarization ratio (FC deposits in percent of broad money)3/: 2014: 53.8; 2015: 50.6; 2016: 47.73/
- Sources cited in table: Maldivian authorities; and preliminary IMF staff estimates and projections based on the 2017 Staff Visit.
Prepared by the IMF Communications Department, November 16, 2017.
