Update Country Report Maldives 06 Dec 2021

Event

Data published by a government agency, Maldives Immigration, show that tourist arrivals in the country rose by 2% month on month in November, to 144,725. This was nearly 5% higher than the number of visitor arrivals in November 2019, before the coronavirus pandemic.

Analysis

In line with EIU's expectation, total tourist arrivals during the first 11 months of 2021 have already doubled from the 555,000 visitors received in 2020. Monthly tourist numbers have recovered to 2019 levels since July, when the local authorities lifted travel restrictions on South Asian travellers following the wave of infection caused by the Delta variant of the coronavirus. The tightening of travel restrictions amid a surge of infection in Europe, which provides nearly half of inbound tourism for the Maldives, alongside the emergence of the Omicron variant, will stymie this momentum in December 2021 and early 2022.

The impressive recovery in tourism in the second half of 2021 was facilitated by minimal travel restrictions in the islands, including the availability of a 30-day visa on arrival and no requirement for quarantine upon presentation of a negative covid-19 test. Backed up by high vaccination coverage, the Maldivian authorities were successful in marketing the archipelago as a safe travel destination, making the most of the nascent recovery in international tourism.

However, the broad-based removal of border restrictions also made the country highly vulnerable to renewed infection, limiting the impact of a travel ban imposed on southern African countries in early December following the emergence of new variant. The first confirmed case of the Omicron variant in the Maldives was reported on December 5th-a development that is likely to prompt several governments to restrict travel to the islands. A rise in general concern over the new variant among tourists will lead to the cancellation of travel plans in the coming months, delivering a subpar tourism season for the Maldives this winter (the traditional peak season) and clouding growth prospects in 2022.

Impact on the forecast

While a full assessment of the negative economic impact of the new variant will depend upon further epidemiological research, its emergence alone will weigh on the short-term recovery in tourism. We will revise down our growth outlook for the Maldives, which projects a return to a pre-pandemic level of GDP by end-2023, to reflect this.