The Republic of Maldives comprises 1,190 islands in 20 atolls spread over 348 square miles in the Indian Ocean. Tourism is the main source of economic activity for Maldives, directly contributing close to 30 percent of GDP and generating more than 60 percent of foreign currency earnings. The tourism sector experienced impressive growth from 2009 to 2019 before a steep decline in 2020 resulting from the COVID-19 pandemic. Tourism began to recover in late 2020 and has steadily increased, reaching 1.88 million tourist arrivals in 2023. Although the Government of Maldives has emphasized the importance of economic diversification, tourism will likely continue to be the major driver of Maldives’ economy, with the government making major investments into expanding the country’s capacity to handle more visitors. In 2022, per capita GDP was estimated at 11,780.82 and World Bank and IMF estimates 6.5 percent economic growth in in 2023, the highest in South Asia. However, income inequality and a lack of employment opportunities remain a major concern for Maldivians, especially those in isolated atolls. In recent years, large scale infrastructure projects in Maldives have contributed to economic growth as well as a significant rise in debt. Following the post-COVID-19 recovery of the tourism industry and the economy, the debt-to-GDP ratio has decreased from 138 percent in 2020 to 113 percent in 2023, an improvement but still a significant percentage for a country that remains highly vulnerable to macroeconomic shifts.
Maldives welcomes foreign investment, although the ambiguity of codified law and competition from politically influential local businesses act as deterrents. U.S. investment in Maldives has focused on the tourism sector, particularly hotel franchising. In 2023, there were a total of 30 new foreign direct investments, out of which 19 were in the tourism and hospitality sector and four were in the construction sector. In 2020, Maldives submitted an updated Nationally Determined Contribution (NDC), which includes an enhanced ambition of 26 percent decrease in emissions and carbon neutrality by 2030, conditioned on receiving financial, technological, and technical support.
Because of Maldives’ heavy dependence on imports, government expenditures ballooned following the steep rise in global fuel and commodity prices accompanying Russia’s invasion of Ukraine in 2022. Government spending has remained high throughout 2023 due to expenditures associated with an election year. While overall government revenue in 2023 was in line with budgeted estimates, the expenditures exceeded the approved budget, resulting in the Ministry of Finance submitting a supplementary budget of MVR 6.5 billion ($421 million) along with the proposed budget for 2024. Subsidies continue to temper inflation, with the headline inflation rate for 2023 remaining at 2.8 percent. In February 2024, official reserves stood at $589 million, a steady decline from $827 million in January 2023.
Serious concerns remain about a small number of violent Maldivian extremists who may have ties to transnational terrorist groups, advocating for attacks against secular Maldivians and Western influence. In 2021, then-Speaker of Parliament and former President Mohamed Nasheed was seriously injured an IED attack motivated by religious extremism. In 2020, attackers, who later affirmed their support for ISIS, stabbed three foreign nationals in Hulhumalé.
During this reporting period, Maldives had a change in government as a result of the September 2023 Presidential elections. In many areas, it is not yet clear whether and how policy approaches may change. READ MORE from U.S. Department of State
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