Finance Minister responds to World Bank forecast on Maldives economy

Finance Minister Ibrahim Ameer has responded strongly to a World Bank report on the Maldives' economic situation.

In its latest report, the World Bank updated its forecasts on the Maldives' economic growth to 6.6 percent from the previous forecast of 8.2 percent. The report said the Maldives is facing challenges due to its high borrowing and fragile economic state. The report further said inflation is expected to rise to 5.7 percent.

Noting that the Maldives will have its presidential election this year, the World Bank said that the increase in expenditure due to the election and the increase in the amount of money allocated to government companies to implement development projects would also negatively affect the economy.

Minister Ameer today tweeted several times in response to the World Bank's professional forecasts. The tweets, posted in the local language Dhivehi, said the number of tourists visiting the Maldives thus far this year increased by 21.5 percent compared to last year.

"It is expected that a record number of tourists will visit the Maldives this year. Therefore, the economic growth will be higher than current estimates," he said.

The minister said the World Bank's estimate that the Maldives' economic pace would be slower than before was due to the base effect that comes in the calculation as GDP growth in 2021 was higher than the World Bank's previous forecast.

The minister also noted that although commodity prices are rising in the world market at the moment, the impact on the Maldives is small compared to many neighboring countries. He said one of the reasons for the slowdown in inflation is the government's provision of subsidies to reduce the prices of oil, electricity, and staple foods.

"The amount spent on subsidies has increased significantly with the rise in world market prices," Ameer said.

Minister Ameer added that the fiscal challenges faced as a result of rising commodity prices and others would be detailed in the statement of fiscal challenges in this year's budget book.

"The necessary steps are being taken to manage these challenges," the minister said.

Ameer added that the increase in the number of loans due to the COVID-19 pandemic would decline in the medium term in proportion to GDP. Changes will be brought to policies in a way that would minimize the impact on the people in order to achieve this, he said.