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World > Asia > Maldives > Economy (Notes)

Maldives - Economy (Notes)


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 $400 million a year. Tourism and related services contributed 28% of GDP in 2006.

Since the first resort was established in 1972, more than 87 islands have been developed, with a total capacity of some 17,000 beds. Maldives has embarked on a rapid tourism expansion plan. The government has awarded tenders for the development of 41 resorts. Over 650,000 tourists (mainly from Europe) visited Maldives in 2006. 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 and contributes 7% of GDP, including fish preparation. The use of nets is illegal, so all fishing is done by line. Production was about 183,000 metric tons in 2005, most of which was skipjack tuna. About 50% is exported, largely to Sri Lanka, Japan, Hong Kong, Thailand, and the European Union. Fresh, chilled, frozen, dried, salted, and canned tuna exports accounted for 94% of all marine product exports. Total export proceeds from fish were about $84 million in 2005.

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 only about 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.


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Notes and Commentary: People - Economy - Government and Political Conditions - Foreign Relations - Relations with U.S.



Facts at a Glance
Geography
People
Government
Economy
Communications
Transportation
Military
Climate
Current Time
Ranking Positions


Notes and Commentary
People
Economy
Government and Political Conditions
Foreign Relations
Relations with U.S.





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