Global credit rating agency, Fitch expects Maldives economy to grow by 18% despite the ongoing pandemic.
In its ‘Credit Risks for Asia’s ‘CCC’ Sovereign’ report, analysts expect Maldives to post a current-account deficit in 2021-2022. However, the path of the pandemic and its impact on tourism, a major source of foreign exchange for Maldives, will heavily influence the prospects for external earnings.
Moreover, external liquidity stress may be relieved by financing support. The Maldives secured significant multilateral funding in 2020, as well as access to the G20 Debt Service Suspension Initiative (DSSI), and such support will continue in 2021-2022 according to Fitch.
The report states an 18% average annual growth in the Maldives in 2021-2022 after a plunge of 30% in 2020, although the forecast is vulnerable to risks around the pandemic’s impact on tourism. Forecasts suggest that real output in 2022 will still be below 2019 levels in the Maldives.
Moreover, public debt of Maldives is expected to skyrocket to a 105%. The report states that this is a real concern to debt sustainability. Maldives faces external debt service obligations of USD468 million from 1Q21 through 2Q22, of which USD142 million is due in 2021. A further USD362 million in government-guaranteed debt falls due in the same period, which may crystallise on the sovereign’s balance sheet.
The report also claims that Maldives vaccination drive will help greatly to recover tourism in the island nation and predicts a generally sustainable growth for the year.