Update Country Report Maldives 11 Mar 2020

Event

The first domestic cases of coronavirus in the Maldives was detected on March 7th when two members of staff at the Kuredu Island Resort tested positive.

Analysis

The two residents are believed to have caught the disease from an Italian tourist who stayed at the resort and subsequently tested positive for the virus on his return to Italy. The resort, which currently has over 1400 people (almost equally divided between guests and staff), has been placed under a temporary lockdown. People who came into contact with the two patients have been quarantined.

With thousands of international visitors arriving in the Maldives every month, the risk of the coronavirus spreading to the archipelago was quite high. As a precautionary measure, the government had suspended direct flights to and from China; imposed travel restriction on visitors to or from that country; and has been placing temporary restrictive measures on islands where suspected cases of coronavirus have been detected. In addition to China, the Maldivian authorities have also suspended direct flights from Iran and Italy, two of the worst-hit countries after China. Moreover, visitors from Italy or those who transited through or spent any time in Italy in the preceding 14 days (effective from March 8th) are being denied entry into the country.

We believe that the active steps being taken by the administration to prevent the spread of the coronavirus in the country will help to contain the proliferation of the disease. Nonetheless, the restrictions, coupled with the reluctance of people to travel internationally in the wake of the coronavirus outbreak, will negatively impact tourism activity, the country's main driver of real GDP growth. Overall, it will be a major factor responsible for the slower pace of economic expansion in 2020.

Impact on the forecast

The latest developments reinforce our view that tourism activity will be adversely affected by the global outbreak of coronavirus. In our next report, we will revise down our real GDP growth forecast of 4.7% for 2020, factoring in a much weaker performance from the services sector.