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 firm control over the presidency and the legislature will aid political effectiveness.
• Mr Solih will continue to pursue socioeconomic reforms and development goals outlined in the Strategic Action Plan for 2019-23. However, progress on this front will be sluggish, owing to resistance to such plans within the political circle.
• Owing to its strategic location in the Indian Ocean, the country attracts interest from India and China. Diplomatic relations with India will continue to strengthen in 2020-21 as the administration shifts its focus away from China.
• We believe that economic growth will average 4.9% in 2020-21 as the economy adjusts to the government's planned fiscal retrenchment measures, which are likely to be imple-mented over the next few months.
• 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 2020-21. The scale of the deficit will ease, however, as construction-related imports fall.

Download the numbers in Excel

Key changes since October 7th

• In view of stronger than anticipated tourism activity data, we have revised up our 2019 and 2020 projections for real growth in exports of goods and services to 6% and 5.6% respectively. This compares with our previous forecasts of 4.2% and 4.5%.
• As a result of the above, we now expect real GDP to grow by 6% in 2019 and 4.7% in 2020, compared with 5% and 4% respectively in our earlier forecast.
• In line with the latest data, which show a modest pick-up in consumer price inflation, we have revised our projections for 2019 and 2020. We now estimate consumer prices to rise by 0.1% in 2019, before declining by 0.3% in 2020.

The quarter ahead

• January 26th-GDP data (Q3 2019): The data release will show whether the pick-up in real GDP growth recorded in the second quarter of 2019 persisted. We believe that although economic growth will remain healthy, it will decelerate modestly in the third and fourth quarters compared with the second quarter.
• February TBC-Tourist arrivals data (December 2019): Tourism activity is one of the main drivers of economic growth in the country and the largest contributor to the services trade surplus. The latest release will provide a complete picture of tourist arrivals for full-year 2019, and we expect this to be stronger than the previous year.