Maldives Economy

The Maldivian economy is based on tourism and fishing. Tourism accounts for 28% of GDP and more than 60% of the Maldives’ foreign exchange. Over 90% of government tax revenue comes from tourism-related taxes. Industry, which consists mainly of garment production, boat building, and handicrafts, accounts for about 7% of GDP. GDP in 2006 totaled $907 million, or about $3,000 per capita. Inflation has moderated to about 3%.

In late December 2004, a major tsunami left more than 100 dead, 12,000 displaced, and property damage exceeding $300 million. As a result, the GDP shark by 3.6% in 2005. A rebound in tourism, post-tsunami reconstruction, and development of new resorts helped the economy recover quickly.

As tourism staged a speedy recovery and government borrowing increased, the balance of payments recorded a surplus of about $40 million in 2006 from a deficit of $17 million in 2005. Government expenditure was estimated at 74.5% of GDP in 2006, compared to 36% of GDP in 2004 before the tsunami.

The Maldivian government began an economic reform program in 1989 initially by lifting import quotas and opening some exports to the private sector. Subsequently, it has liberalized regulations to allow more foreign investment. Development has been centered upon the tourism industry and its complementary service sectors. Taxes on the tourist industry have been put into infrastructure projects and used to improve technology in agriculture.

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