Political and economic outlook

• The Economist Intelligence Unit expects the president, Ibrahim Mohamed Solih, of the Maldivian Democratic Party (MDP), to serve a full term, ending in 2023. The MDP's emphatic victory in the April 2019 parliamentary election will enhance political stability.
• The MDP's strong performance in the latest legislative election has ensured that the party now controls both the presidency and the legislature, which will aid political effectiveness and smooth policymaking for the government.
• The government will pursue policies designed to put the country's public finances back on a more sustainable footing after a bout of intense spending on infrastructure under the previous presidential administration of Abdulla Yameen Abdul Gayoom.
• We believe that economic growth will decelerate to an average of 4.5% in 2019-20, from 7.2% in 2017-18, owing largely to the downsizing of ongoing public infrastructure projects and slower export growth, resulting from falling tourist arrivals from China.
• Despite the tourism-related surplus on the services account, a wide merchandise trade deficit will ensure that the Maldives continues to post current-account deficits in 2019-20. The scale of the deficit will ease, however, as construction-related imports fall.

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Key changes since April 10th

• In view of data for 2018, we have revised our current-account forecast to reflect a wider shortfall in 2019-20. We now expect this deficit to average the equivalent of 21.4% and 14.1% of GDP in 2019 and 2020 respectively, compared with 12.7% and 6.6% of GDP earlier.

The quarter ahead

• July 29th-GDP data (Q1 2019): The data release will show whether the weakness in year-on-year real GDP growth in the final quarter of last year persisted at the start of 2019. We expect average real GDP growth to decelerate to 5% in 2019, from an estimated 7.5% in 2018.
• August-Tourist arrivals data (June): Tourism activity is one of the main drivers of economic growth in the country and is the largest contributor to the services trade surplus. We expect growth in tourist arrivals to moderate slightly in 2019-20.