Update Country Report Maldives 24 Jan 2019

Event

According to the National Bureau of Statistics, consumer prices rose by 0.3% year on year in November 2018, after being flat in October.

Analysis

Consumer price inflation was subdued throughout January-November 2018, with prices falling in four of those months and increasing at a tepid pace in the others. Mild inflation in November was supported by increases in the costs of transport and communication, which grew respectively by 2.1% and 1.2% year on year. There was a uniform year-on-year increase of 2.3% in the cost of education in each of the first 11 months of 2018, reflecting an increase in fees at the start of the year.

The country is mostly dependent on imports, including fuels, to meet its domestic demand. However, the currency, the rufiyaa, is pegged to the US dollar, so the price of imports is largely insulated from exchange-rate fluctuations. As such, we believe that consumer price inflation will remain muted in 2019, owing in large part to a downward trend in global oil prices.

Impact on the forecast

We estimate that consumer prices declined by an average of 0.5% in 2018. However, we are likely to revise down our forecast of an average increase of 0.4% in 2019 in line with the downward adjustment of our global oil prices forecast.