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 2006 totaled $907 million, or about $3,000 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 nearly 18% in 2006 from a contraction of 4.5% in 2005. Inflation has moderated to about 3%. As tourism staged a speedy recovery and government borrowing increased, the balance of payments recorded a surplus of about $40 million in 2006 from a deficit of $17 million in 2005. Fiscal control has deteriorated due to tsunami reconstruction as well as an increase in non-tsunami-related government expenditure. Government expenditure was estimated at 74.5% of GDP in 2006, compared to 36% of GDP in 2004 before the tsunami. The budget deficit was 18% of GDP in 2006. While reconstruction is ongoing, the recovery process remains underfunded.
The Maldives has been running a merchandise trade deficit in the range of $200 to $260 million annually since 1997. The trade deficit ballooned to $386 million in 2004, $493 million in 2005, and reached an estimated $618 million in 2006, largely the result of increased oil prices and increased imports of 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 $450 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 17,500 beds. Maldives has embarked on a rapid tourism expansion plan. The government has awarded tenders for the development of about 40 new resorts. Over 650,000 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 4.5% in 2007. However, international tuna prices increased in 2007,
thereby increasing export earnings to about $100 million. The use of nets is
illegal; all fishing is done by line. Production was about 115,000 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% 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 (2006 est): $907 million.
GDP growth rate (2006 est.): 18.5%.
Per capita GDP (2006 est): $3,000.
Inflation (2006): 2.8%.
Percentages of GDP (2006 est): Tourism--28%; transport and communications--17%; government--15%; manufacturing--7%; real estate--6%; fishing--7%; construction--6%; agriculture--2%; other--12%.
Trade (2006 est): Exports--$147 million: fish products. Major markets--U.S., Thailand, EU, Sri Lanka, Japan (source: Maldives Customs Service). Imports--$832 million: oil, construction material, prepared foodstuffs, vegetables, animal products, electrical appliances, wood products, computers, transport equipment. Major suppliers--Singapore, Sri Lanka, EU, India, Malaysia, U.A.E.
