In Focus: Maldives 2021 provides an overview of Maldives' tourism landscape and hotel market performance, infrastructure development, workation, long-stay tourism, guest house culture, hotel transactions and investment in 2020, COVID-19 situation, outlook and crisis management.

Key Highlights in 2020: 

The Republic of Maldives is located in the Indian Ocean, southwest of Sri Lanka and India. The country comprises 1,192 coral islands, which are divided into 26 major island rings, known as atolls. For administrative purposes, these 26 atolls are organised into nineteen administrative districts across an area of 90,000 square kilometres in the Indian Ocean.

Famous for its natural beauty with white sand beaches and crystal-clear waters, the Maldives is ranked as one of the best diving destinations in the world. Tourists seeking leisure and relaxation are especially attracted by the breath-taking scenery, peace, and quietness of the Maldivian islands. 

Due to the COVID-19 pandemic, the Maldives’ overall economy has contracted by 18.6% in 2020. This is attributable to its strong dependence on international tourism, which has been negatively impacted worldwide due to lockdowns and travel restrictions. 

According to the World Travel & Tourism Council (WTTC), the total contribution of tourism to the Maldives’ Gross Domestic Product (GDP) in 2019 was 11.5%.
 
Tourism arrivals have slumped from approximately 1.7 million in 2019 to approximately 555,000 in 2020 due to the travel disruptions caused by COVID-19.

The Maldives hotel investment market recorded zero transaction volume in 2020 amidst the global economic uncertainty, the only year in the last five years (2016 to 2020) to record zero transaction volume. 

Source: HVS Research

Economic Outlook 

In 2020, the global economic growth was rocked by the COVID-19 pandemic that caused countries to go into lockdown and stock markets to plunge.

Activities around the world have seemingly come to a halt with travelling restricted and work-from-home becoming a new normal. US-China political tension continues to be uncertain, along with the plans for Brexit. With growing uncertainties in the geopolitical landscape and global market pressures, international trade and investment activities have softened and are expected to remain subdued.

According to the World Bank, global economic growth is projected to expand at 4% in 2021, albeit a slow recovery.  

Figure 1: Economic Outlook

Source: International Monetary Fund, World Bank, August 2021

Economic Performance & Outlook

Given the reliance of the Maldives’ economy on international tourism and related development, the slowing of the travel industry and construction activities due to COVID-19 has resulted in a 32.2% contraction in real GDP growth in 2020. Recovery is expected in 2021 with an expansion of 18.9% as economic activities gradually resume and consumer sentiment improves with the administration of the vaccine.

Furthermore, the Maldives has one of the most relaxed regulations for international visitors, and the “one-resort-one-island” concept helps to enhance exclusivity amidst social distancing regulations. 

Currency Account Balance

In 2020, the Maldives’ current account balance (% of GDP) has declined from -20.4% in 2019 to -24.4% in 2020. This is likely attributed to the loss of income from tourism activities on the back of a weaker international travel market and slowing of construction activities, on which the Maldives is heavily dependent. 

Inflation

Due to the pandemic, consumer price inflation for Maldivian rufiyaa has declined from 1.3% in 2019 to -1.6% in 2020. This is due to a decline in global oil prices in 2020 and the sluggish recovery of domestic demand. The country is largely dependent on imports, including fuel, to meet its domestic demand. Consumer prices are therefore responsive to movements in international commodity prices, particularly oil prices.

Moving forward, International Monetary Fund (IMF) expects the inflation rate to increase to 1.6% in 2021 as it emerges from a low base. This is owing to the recovery in global energy and nonenergy prices and the general recovery of the economy. IMF forecasts that inflation will rise by an annual average of approximately 2.0% in the next four years from 2022 to 2025.

Infrastructure Developments

2020

• Horafushi Airport: Horafushi Airport: A domestic airport serving the island of Hoarafushi, in the northernmost Haa Alif Atoll. The new airport is constructed on reclaimed coastal land.
• Funadhoo Airport: A domestic airport that serves the inhabited islands of the Shaviyani Atoll. The airport is located on the nearby island of Farukolhufunadhoo.
• Maavarulu Airport: A domestic airport serving the Gaafu Dhaalu Atoll.

2021

• Madivaru Airport: A domestic airport expected to serve the island of Madivaru, Lhaviyani Atoll.
• Fari Islands: A multi-resort concept that features three international hospitality brands, Capella, Patina, and The Ritz-Carlton. The development is located in North Malé Atoll, 50-minutes by speedboat from Malé International Airport. The archipelago also features the picturesque Fari Marina, built around a vibrant Fari Beach Club, charming boutiques, and a selection of handpicked, upscale food and beverage options. The ongoing development has opened the 100-key Ritz-Carlton Maldives on 1 June 2021.

2023

• CROSSROADS Maldives: Situated amongst the Kaafu Atoll and Emboodhoo Lagoon, CROSSROADS Maldives is the first extraordinary multi-island, fully integrated leisure destination. The development has opened two resorts: 198-key SAii Lagoon Maldives - Curio Collection by Hilton and 178-key Hard Rock Hotel Maldives. The islands are connected by footbridges for guests to explore the integrated hub. It features shopping, dining, a marina, spas, the Marine Discovery Centre, and more. The development is expected to inaugurate an 80-villa SO/Maldives on Island 3 in 2023.

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