Fish and fish products are the country's only major export commodities. The bulk of the country's domestic demand is met from imports of consumer and capital goods. As a result, the country runs a wide deficit on the merchandise trade account. The goods trade deficit is likely to have widened significantly in 2018. Merchandise imports rose by 25.3% year on year in US dollar terms during January-October, according to the latest data from the MMA, while export growth was almost flat.

Tourism exports account for almost 90% of the total value of services exports. Tourism arrivals grew at healthy rate of 6.8% in 2018. However, we expect the increase in the surplus on the balance of services trade over 2018 to be insufficient to offset fully the jump in the merchandise trade deficit. With the currency remaining fixed at an overvalued level and the primary and secondary income accounts remaining in deficit, we forecast that the current account will remain in deficit in 2019-20. However, we expect the shortfall to be narrower during this period compared with 2017-18, averaging the equivalent of 9.7% of GDP a year in 2019-20, compared with 20.6% in 2017-18, as weaker domestic demand will lower the import bill.