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 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 biggest risk for the country's growth outlook, as the imposition of travel restrictions would disrupt economic recovery.

Growth momentum in 2023 will be partly driven by the return of tourists from China, a leading source of tourism in 2019, as we expect China's strict zero-covid measures to be eased from mid-2023. Tourism demand in 2022-23 will also improve as travel restrictions are lifted globally. We forecast 1.5m tourist arrivals cumulatively in 2022, improving from 1.3m in 2021, but below the 1.7m recorded in 2019. The pace of economic recovery will slow in 2023 compared with 2022, but we still expect real GDP to be 5.7% larger than the 2019 level.

We do not expect another nationwide lockdown in 2022-23, therefore work on ongoing infrastructure development projects will be able to continue undisrupted. Tourism-affiliated services such as transport and the retail trade will benefit from the anticipated return of visitors. Improving household earnings and continued subsidies from the government will prop up private consumption.