ECONOMY
The Maldivian
economy is based on tourism and fishing. Of the Maldives' 1,191
islands, only 200 are inhabited. The population is scattered throughout
the country, with the greatest concentration on the capital island,
Male'. Limitations on potable water and arable land constrain
expansion.
Development
has been centered upon the tourism industry and its complementary
service sectors, transport, distribution, real estate, construction,
and government. Taxes on the tourist industry have been plowed
into infrastructure and used to improve technology in the agricultural
sector.
GDP in 2007 totaled $1.1 billion, or about $3,460 per capita. The Maldivian economy has made a remarkable recovery from the tsunami, which inflicted damages of about $375 million, excluding $100 million in damages to resorts, the bulk of which was covered by private insurance. A rebound in tourism, post-tsunami reconstruction, and new resort construction helped increase GDP by about 19% in 2006 and 6.6% in 2007 from a contraction of 4.5% in 2005. Inflation accelerated to about 10% in 2007 and to about 15% by May 2008. Due to rising imports and higher oil prices, the trade deficit ballooned to $700 million in 2007. However, due to a tourism boom and increase government borrowing, the balance of payments recorded a surplus of about $45 million in 2006 and 2007. Fiscal control has deteriorated due to tsunami reconstruction and in particular due to an increase in non-tsunami-related government expenditure. Government expenditure expanded to over 60% of GDP in 2005-2007, compared to 36% of GDP in 2004 before the tsunami. Government expenditure is projected to expand further to 73% of GDP in 2008. Consequently the budget deficit is projected at 10% of GDP in 2008. In July 2008 the government acknowledged that its economy is in a recession. While tsunami reconstruction is ongoing, the recovery process remains underfunded.
The Maldives had a merchandise trade deficit of under $300 million until 2003. Since then the trade deficit reached an unprecedented $700 million, largely the result of increased oil prices and increased imports of food and construction material.
International shipping to and from the Maldives is mainly operated by the private sector with only a small fraction of the tonnage carried on vessels operated by the national carrier, Maldives Shipping Management Ltd. Over the years, the Maldives has received economic assistance from multilateral development organizations, including the UN Development Program (UNDP), Asian Development Bank, and the World Bank. Individual donors--including Japan, India, Australia, and European and Arab countries (including Islamic Development Bank and the Kuwaiti Fund)--also have contributed.
A 1956
bilateral agreement gave the United Kingdom the use of Gan--in
Addu Atoll in the far south--for 20 years as an air facility in
return for British aid. The agreement ended in 1976, shortly after
the British closed the Gan air station.
Economic
Sectors
Tourism. In recent years, Maldives has successfully marketed its natural assets for
tourism--beautiful, unpolluted beaches on small coral islands, diving in blue
waters abundant with tropical fish, and glorious sunsets. Tourism now brings in
about $500 million a year. Tourism and related services contributed 28% of GDP
in 2007.
Since the first resort was established in 1972, more than 90 islands have been developed, with a total capacity of some 18,500 beds. Maldives has embarked on a rapid tourism expansion plan; another 65 resorts are under construction. Over 675,000 tourists (mainly from Europe) visited Maldives in 2007. The average occupancy rate is over 80%, and reaches over 95% in the peak winter tourist season. Average tourist stay is 8 days.
Fishing. This sector employs about 11% of the labor force. The fisheries industry,
including fish processing, traditionally contributes about 7% of GDP. Due to a
drastic drop in the fish catch, the industry's contribution to GDP was only
about 5% in 2007. Fish export earnings were estimated at $100 million in 2007.
The use of nets is illegal; all fishing is done by line. Production was about
65,000 metric tons in 2007, most of which was skipjack tuna. More than 60% is
exported, largely to Sri Lanka, Japan, Hong Kong, Thailand, and the European
Union. Fresh, chilled, frozen, dried, salted, and canned tuna exports account
for about 90% of all marine product exports.
Agriculture. Poor soil and scarce arable land have historically limited agriculture to a few
subsistence crops, such as coconut, banana, breadfruit, papayas, mangoes, taro,
betel, chilies, sweet potatoes, and onions. Almost all food, including staples,
has to be imported. The December 2004 tsunami inundated several agricultural
islands, which could take a significant amount of time to recover. Agriculture
provides about 2.5% of GDP.
Manufacturing. The manufacturing sector provides less than 7% of GDP. Traditional industry
consists of boat building and handicrafts, while modern industry is limited to a
few tuna canneries, a bottling plant, and a few enterprises in the capital
producing PVC pipe, soap, furniture, and food products. Five garment factories
that had exported principally to the United States closed in 2005, following the
expiration of the Multi-Fiber Arrangement (MFA) that had set quotas on
developing country garment exports to developed countries. The loss of these
factories has not proven an insurmountable hurdle, however, as most of the
profits were repatriated and most of the labor was expatriate.
Other. The construction sector contributes approximately 6% of GDP due to tsunami reconstruction and new resort construction.
GDP (2007 est.): $1.1 billion.
GDP growth rate (2007): 6.6%.
Per capita GDP (2007 est.): $3,460.
Inflation, year over year (2007): 10.34%.
Percentages of GDP (2007): Tourism--28%; transport and communications--20%; government--16%; manufacturing--7%; real estate--6%; fishing--5%; construction--6%; agriculture--2.5%; other--9%.
Trade (2007): Exports--$232 million: fish products. Major markets--U.S., Thailand, EU, Sri Lanka, Japan (source: Maldives Customs Service). Imports--$936 million: oil, construction material, prepared foodstuffs, vegetables, animal products, electrical appliances, wood products, computers, transport equipment. Major suppliers--Singapore, U.A.E., India, EU, Sri Lanka, Malaysia.
