DTIS, Volume I - Enhanced Integrated Framework (EIF)

CHAPTER 2
MACROECONOMIC POLICIES AND PERFORMANCE
Chapter Plan
This chapter reviews the main trends in the Maldives economy, employment and other
macroeconomic and financial indicators. It concludes with an assessment of the impact of
the December 2004 tsunami.
I. Economic Trends
Notwithstanding the natural constraints of an elongated archipelago with a dispersed
population and limited land area, the Maldives has enjoyed relatively strong growth
during the ten years between 1994-2004. Average real GDP growth during this period
was 7.5 per cent per annum. In 2004 GDP was Rufiyaa (Rf.) 8.2 billion (US$ 644.4
million) with a GDP per capita of US$ 2,401, up from US$ 1,229 in 1990, or almost a
doubling over 15 years (see Table 2.1).
Table 2.1: Key Indicators (US$ m)
2000 2001 2002 2003 2004
Real GDP (1995 constant prices, Rf Mn) 6,345.5 6,564.4 6,992.8 7,581.1 8,248.8
Real GDP Growth rate 4.8 3.5 6.5 8.4 8.8
GDP (million US$) 539 558 594 645 695
Population 271,410 275,975 280,549 285,066 289,480
GDP per capita (US$) 1,986 2,021 2,118 2,262 2,401
Source: Economic Statistics, MMA, August 2005; MMA Economic Statistics Vol. 5, No. 4, MMA, December
2004 and update April 2005; and GDP by Kind and Activity 1995 – 2004, MPND
The GDP per capita level places the Maldives in the group of lower middle-income
developing countries. Graduation from LDC status was under discussion at the UN
ECOSOC, but is now delayed due to the severe set back caused by the tsunami.
The composition of the Maldivian economy has changed considerably over the last three
decades. In the mid-1970s the primary sector 3 encompassing agriculture, fisheries and
coral sand mining was dominant with a GDP contribution of 40 per cent. The secondary
sector (manufacturing, utilities and construction) contributed 25 per cent and the tertiary
sector (encompassing trade, services, government etc) contributed 35 per cent (see Graph
1). The single most important economic activity in the 1970s was fisheries, accounting
for up to 32 per cent of GDP. However, the level of value addition was low and confined
to the simple processing of household based products known as ‘Maldivian Fish’. This
consisted of dried, salted and smoked tuna fish products for local consumption and export
3 According to the International Standard Industrial Classification (ISIC) of all economic activities
definitions
5