Outlook for 2017 Tourism - Maldives Monetary Authority

Outlook for 2017 The Maldivian economy is estimated to have gained further steam in 2017, with the real GDP1 growth projected to rise to 6.9% in 2017 following a 6.2% growth in 2016. The stronger-than-expected growth is largely underpinned by the brisk

performance of the tourism sector. The continued buoyancy in the construction sector, stemming from the on-going infrastructure projects and new housing projects, is also expected to propel overall economic growth further.

The fiscal deficit2 is projected to decrease to 2% of GDP in 2017 from 10% of GDP in 2016. Meanwhile, according to the balance of payments forecasts of October 2017, the current account deficit is projected to contract to 22% of GDP in 2017 from an estimated 25% of GDP in 2016.

Tourism During October 2017, total tourist arrivals increased

by 9% in annual terms and totalled 127,986. The annual

growth in tourist arrivals was on account of increases in arrivals from the European market and the Asia

Key Tourism Indicators thousands

and Pacific region. A significant rise in arrivals from

Germany and Russia contributed to the growth in the European market. Meanwhile, the growth in the

Asia and Pacific region stemmed from a remarkable

increase in arrivals from Thailand, coupled with an increase in arrivals from India, which offset the slight decline in arrivals from China. During the month, total bednights of the resorts recorded a significant growth of 14% in annual terms and the average

duration of stay increased marginally from 6.0 days in October 2016 to 6.2 days in October 2017. Despite

these positive developments, the occupancy rate of 1 GDP growth rates are based on market prices. 2 According to the 2018 national budget approved by the parliament.

Source: Ministry of Tourism

annual percentage change

Monthly Economic Review November 2017

the resorts fell slightly to 79% in October 2017 from 80% in October 2016, reflecting the 15% annual increase in operational bed capacity of resorts.

Fisheries In October 2017, fish purchases made by fish processing

Fish Exports annual percentage change

companies totalled 5,076.9 metric tons, registering an

annual decline of 36%, while it registered a growth of 70% in monthly terms.

During October 2017, both the volume and earnings from

fish export registered an annual decrease of 38% and

18%, respectively. The decline in both the volume and earnings of fish exports was largely due to a significant

decrease in frozen yellowfin tuna and frozen skipjack tuna. In contrast, both the volume and earnings from canned or pouched tuna exports registered a growth

over the period. In monthly terms, both the volume and Source: Maldives Customs Service

earnings from fish exports registered a growth of 88% and 80%, respectively, driven by increases in frozen skipjack and fresh or chilled yellowfin tuna exports.

World Bank Commodity Price Index annual percentage change

Global Prices During October 2017, the World Bank commodity

price data registered an increase in energy prices,

both in annual and monthly terms, by 11% and 3%, respectively. Reflecting this increase, the price of crude oil3 stood at US$54.9 per barrel at the end

of October 2017, recording a growth of 11% and 4% in annual and monthly terms, respectively.

Non-energy prices also registered an annual growth of 6%, while it remained unchanged in monthly terms. The Source: World Bank

annual increase in non-energy prices largely reflected

the hike in metal prices, which was slightly offset by the decrease in annual food prices. In monthly terms, both

metal and food prices remained largely unchanged.

2

3 Monthly average of Brent, Dubai Fateh and West Texas Intermediate.


In ation The rate of inflation (measured by the annual percentage

change in the Consumer Price Index [CPI]4) softened to 0.7% at the end of October 2017 after registering 2.9% at the end of September 2017. This was largely a ributed

to a decline in food prices coupled with the dissipation

of the base effect from the reduction of food subsidy

in October 2016, despite the positive contribution from fish prices. The decrease in electricity prices also

Consumer Price Index annual percentage change

exerted downward pressure despite an increase in price of cigare es and housing rentals during the period.

As for the monthly percentage change in the CPI, it marked a turnaround from a positive inflation of 0.5% recorded at the end of September 2017, to a negative

inflation of 0.3% in the review month. This was due to

a significant decrease in fish prices during the month.

Public Finance According to monthly government revenue and

Source: National Bureau of Statistics

during October 2017 amounted to MVR1.3 billion, which

Government Revenue and Expenditure

expenditure data5, total revenue (excluding grants) was an annual increase of MVR80.2 million. Meanwhile,

millions of ru yaa

total expenditure (excluding amortisation) decreased by

MVR808.9 million in annual terms and totalled MVR1.5 billion in October 2017. The increase in total revenue was due to increases in both tax revenue and non-tax revenue.

The increase in tax revenue was largely owed to a rise in

business profit tax, while the growth in non-tax revenue was mainly due to an increase in airport development fees. As for the decrease in expenditure, both current

expenditure and capital expenditure registered a decline during the period. The decrease in current expenditure

Source: Ministry of Finance and Treasury

largely reflected the fall in expenditure on financing and interest costs, while the reduction in capital expenditure was mainly due to lower spending on the Public Sector Investment Program projects during this period. 4 Inflation analysis is based on CPI data at the national level.

5 Monthly income and expenditure data are subject to change and may vary from month-to-month as public accounting system data are updated regularly.

3


Government Securities The total outstanding stock of government securities,

Treasury Bills and Treasury Bonds millions of ru yaa

which includes treasury bills and treasury bonds totalled MVR22.0 billion at the end of October 2017, registering a slight decline of 2% in annual terms and

remaining relatively unchanged in monthly terms. The annual decline was due to a significant fall in the outstanding stock of treasury bills, which was largely

offset by a substantial increase in the outstanding stock of treasury bonds. The outstanding treasury

bills fell by 7% (MVR971.3 million) while the outstanding treasury bonds rose by 6% (MVR540.8

million) during the period. The decline in treasury

bills was due to a significant decrease in treasury Source: Maldives Monetary Authority

Treasury Bills by Holder millions of ru yaa

bills holdings by commercial banks, coupled with a decrease in holdings by public non-financial corporations. Meanwhile, the growth in treasury

bonds largely reflected the conversion of part of the treasury bills to treasury bonds.

In monthly terms, the outstanding stock of treasury

bills rose by MVR196.2 million while the outstanding stock of treasury bonds fell by MVR5.1 million. The

increase in treasury bills investments was mainly due to the significant increase in such investments by other financial corporations which was partly

offset by the decrease in treasury bills investments by commercial banks. Source: Maldives Monetary Authority

4


Interest Rates of Treasury Bills

Interest Rates of Treasury bills

percent

Treasury bills of all maturities continue to be issued

under a tap system since they were reverted back in the year 2014. Since the rates on 28-, 91-, 182- and

364-day treasury bills were lowered to 3.50%, 3.87%,

4.23% and 4.60%, respectively in October 2015, it has remained unchanged up until the review month.

Broad Money The annual growth rate of broad money recorded a

decline of 3%, after a 6% decrease recorded at the end

Source: Maldives Monetary Authority

Determinants of Broad Money annual percentage change

of September 2017, and stood at MVR30.5 billion at the end of October 2017. This was mainly contributed

by an annual decrease in the net foreign assets (NFA)

of the banking system, largely due to a fall in the

NFA of commercial banks. However, the decrease in NFA of the banking system was partly offset by the increase in net domestic assets (NDA). The NDA of

the banking system increased owing to the growth in domestic claims of commercial banks, primarily due to credit extension to the private sector.

Monetary Base


Determinants of Monetary Base annual percentage change

The monetary base decreased by 8% at the end of

October 2017, after recording an annual decrease of

1% at the end of September 2017, and amounted to

MVR9.5 billion at the end of the month. The fall in reserve money was driven by a substantial decline

in the NFA of the MMA coupled with a decrease in NDA of the MMA.


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Monetary Operations millions of ru yaa

Monetary Operations The two main instruments available to the MMA to

absorb excess liquidity in the banking system are the overnight deposit facility (ODF) and the open market

operations (OMO). However, the OMO continue to remain suspended since May 2014 and the excess liquidity in the system is absorbed by the commercial

banks’ continuous and persistent placement of these funds in the ODF. In October 2017, the total liquidity

absorbed averaged MVR3.3 billion, which was a

growth of MVR225.4 million and MVR530.1 million Source: Maldives Monetary Authority

in monthly and annual terms, respectively.

Imports and Exports Imports and Exports millions of US dollars

During

October

2017,

total

domestic

exports6

decreased by 18% (US$3.2 million) in annual terms

and the expenditure on imports increased by US$28.0 million. The decrease in domestic exports largely

stemmed from the decline in earnings from frozen

skipjack tuna and frozen yellowfin tuna, significantly

offse ing the increase in earnings from canned or pouched tuna exports. The annual growth of import

expenditure largely reflected the increase in import of construction related items. In addition, increases

in import of food items; petroleum products; and Source: Maldives Customs Service

machinery and mechanical applicances contributed

to the annual growth in total imports. In contrast,

import of transport equipments and parts declined over the period.

6 Total merchandise exports figure was not available at the time of publication.

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Gross International Reserves Gross

international

reserves

(GIR)

stood

at

US$494.4 million at the end of October 2017,

registering a decline of 9% and 5% in annual and monthly

terms,

respectively.

Usable

Gross International Reserves millions of US dollars

reserves7

amounted to US$179.8 million at the end of

October 2017, representing an annual and monthly

decline of 3% and 6%, respectively. The monthly decrease in usable reserves largely reflected a

decline in foreign currency receipts by the MMA.

Exchange Rate With effect from 11 April 2011, the Maldivian rufiyaa

was allowed to fluctuate within a horizontal band of 20% on either side of a central parity of MVR12.85

per US dollar. However, immediately after the introduction of the exchange rate band, the exchange


Bilateral Exchange Rates of the Ru yaa annual percentage change

rate of the rufiyaa per US dollar moved towards the upper limit of the band and since then it has remained virtually fixed at MVR15.42 per US dollar.

Mirroring the movements of the US dollar against the currencies of major trading partners of the Maldives

during October 2017, the rufiyaa depreciated in annual terms against the pound sterling, the euro, the Indian rupee, the Chinese yuan and the Singapore

dollar while it appreciated marginally against the Sri Lankan rupee. As for monthly changes, the rufiyaa depreciated against the Indian rupee while it

Source: Bank of Maldives Plc

appreciated against the pound sterling and the euro.

Meanwhile, it largely remained unchanged against the Chinese yuan, the Singapore dollar and the Sri Lankan rupee.

7 Usable Reserves = GIR – Short-term foreign liabilities. This shows the amount of funds that are readily available for use by the MMA in the foreign exchange market.

This report is prepared by the Research Division of the MMA. For further enquiries please contact us at 3328028 or e-mail us at [email protected]

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MALDIVES MONETARY AUTHORITY

Boduthakurufaanu Magu Male’ - 20182 Republic of Maldives Tel: (960) 330 8679 Fax: (960) 332 3862 Email: [email protected] Website: www.mma.gov.mv