Given the dominant role played by tourism in the Maldivian economy, real GDP growth in 2022-23 will be tied closely to the recovery of activity in the sector. A brighter outlook for international travel and the country's impressive vaccination coverage point to strong growth in 2022-23. By 2023 we expect real GDP to be back close to its 2019 level.

India will maintain its status as the leading source of tourism in the Maldives, while visitors from Europe (especially Russia) are also expected to arrive in significant numbers as governments relax quarantine rules for citizens returning from international travel. Outbound tourism from China-the country's other main source of tourism-will be the slowest to recover, owing to the Chinese authorities' adherence to a "zero-Covid" policy that requires lengthy quarantine for residents returning from overseas.

Following Covid-19 disruption, the resumption of work on ongoing infrastructure development projects will boost investment activity in the economy. Tourism-affiliated services, such as transportation and retail trade, will also benefit from the anticipated return of visitors. Improving household earnings and continued support from the government, in the form of subsidies, will prop up private consumption.

The emergence of more contagious strains of the coronavirus presents the main downside risk to our forecast, as this could prompt travel restrictions and disrupt the pace of economic recovery. Although resort islands are naturally separated from islands inhabited by locals in the Maldives, a sustained rise in new domestic infections would prompt governments across the world to restrict travel to the archipelago by their citizens (as was the case in the second quarter of 2021, when the Delta variant of the coronavirus was spreading through South Asia). A surge in infections in India and Europe would equally hamper tourist inflows into the Maldives, derailing economic recovery.