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. The country's wide vaccination coverage, lenient visa procedures and natural separation of resorts from the main island inhabited by locals will underpin its popularity as a top tourist destination. The emergence of more contagious strains of the coronavirus, like Omicron, presents the main downside risk for the country's growth outlook, as this could prompt travel restrictions and disrupt the pace of economic recovery.

Nevertheless, higher global vaccine coverage, especially in the developed world, is expected to blunt the severity of future outbreaks and encourage more lax border restrictions globally in 2022 relative to 2021. This will increase tourism demand while also increasing competition from other tourist destinations. We expect the Maldives to clock in 1.5m tourist arrivals cumulatively over the year, up from 1.3m in 2021 but below 1.7m in 2019. The pace of recovery will slow in 2023, but we still expect real GDP to be 4% larger than 2019 level.

India will maintain its status as the leading source of tourism in the Maldives, while visitors from Europe (making up nearly half of the country's inbound tourism) are also expected to arrive in significant numbers. Outbound tourism from China-another traditionally important source of tourism-will only begin to recover in earnest in 2023, given our expectation that the Chinese authorities will continue adhering to a "zero-covid" policy through most of 2022, requiring lengthy quarantine for residents returning from overseas.

We do not expect a nationwide lockdown to be reimposed in the Maldives in 2022-23, allowing undisrupted work on ongoing infrastructure development projects. 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.