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 strong economic growth in India will support increased exports of tourism services to that nation in 2019-20. This will serve to drive average annual economic growth of 4.5 % in 2019-20.
• 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 January 10th

• In view of data for the third quarter of 2018 we have revised up our real GDP forecasts for 2019-20. We now expect the economy to expand by an average 4.5% a year in 2019-20, compared with 3.5% previously.
• We have revised down our forecast for consumer price inflation, owing to a downward revision to our forecast for global oil prices. We now expect consumer prices to fall by an average 0.5% a year in 2019-20, compared with an average growth rate of 0.3% previously.
• On the back of the latest data for 2017, we have revised our forecast for the current account to reflect a wider deficit as a share of GDP. We now expect the shortfall to average the equivalent of 9.7% of GDP in 2019-20, compared with 8.6% previously.

The quarter ahead

• April 28th-GDP data (Q4 2018): The data release will show whether the pick-up in economic growth in the third quarter of 2018 was sustained in the fourth quarter. We expect average real GDP growth to decelerate to 5% in 2019, from an estimated 7.5% in 2018.
• May-Tourist arrivals data (March): 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.