Maldives: Economic Update - October 2020

Transcription

1. ECONOMIC UPDATE OCTOBER 2020 VOLUME 2 ISSUE 10
2. About the Economic Update Economic Update is a new monthly publication produced by the Research Division of MMA presenting a quick overview of current developments in the Maldivian economy . It also includes a chart pack of global economic and financial indicators. The Economic Update will be posted on MMA’s website at the end of each month. This Economic Update is based on the latest available data as at 28 October 2020.
3. Domestic Economic Developments Real Economy Gross Domestic Product • According to the advance estimate of the Quarterly National Accounts for Q2-2020 released by the National Bureau of Statistics, real GDP declined significantly by 51.6% in Q2-2020, when compared with the same quarter a year ago. This was a deeper plunge when compared with the revised growth rate of -5.0% for Q1-2020 (previously at -5.9%). – The marked decline in growth during Q2-2020 reflected the adverse effects of spread of the COVID-19 pandemic on the domestic economy. Particularly, the government imposed a full lockdown in the Greater Male’ area for a large part of the quarter, while the international border remained temporarily closed from 27 March 2020. As such, negative contributions were observed in the main sectors of the economy including tourism; transport and communication; wholesale and retail trade; and construction sector. – On the upside, activity in public administration; and human health and social work activities picked up over the review quarter. Annual GDP Growth Forecast • Real GDP growth is now projected to decline significantly in 2020 due to the severe impact of COVID-19 pandemic on tourist arrivals amid strict measures taken by governments across the world to contain the spread of COVID-19. In 2020, tourist arrivals is expected to fall sharply, with negative spillover effects on all major sectors of the economy such as transport and communications; construction and; wholesale and retail trade. Economic Update - October 2020 | 1
4. Tourism • In September 2020, both tourist arrivals and bednights declined annually, by 92% and 91%, respectively. – Following the reopening of the Maldives border to international tourists on 15 July 2020, activity in the tourism sector resumed. However, the pickup in tourist arrivals has been slow, as global tourism demand has been low due to the spread of the COVID-19 pandemic. During September 2020, the most number of tourist arrivals were recorded from the European market. • When compared with September 2019, the operational bed capacity of the tourism industry decreased by 50%, while the occupancy rate fell to 8% in September 2020, from 48% in September 2019. • Overall, for the period January to September 2020, total tourist arrivals decreased by 68% in annual terms, while total bednights of the industry recorded a 63% decline. During this period, average stay stood at 21.6 days, while it stood at 6.3 days in the corresponding period of 2019. Economic Update - October 2020 | 2
5. Inflation • The rate of inflation, as measured by the annual percentage change in the national CPI, continued to remain negative in September 2020 as well. However, inflation edged up to -0.9% in September 2020 from -1.2% August 2020 mainly reflecting the increase in price of tobacco, which observed the largest increase, following the ratification of the 17th amendment to Import Export Act in July 2020 imposing additional duties on specific tobacco products. In addition to this, food prices continued to pick up largely due to the rise in prices of certain vegetables. Meanwhile, the rate of inflation continued to be dragged down by the fall in the price of information and communication services; and housing rent, which reflected a reduction in telecommunication prices and temporary relief given on rent due to COVID-19, respectively. – From the major categories of the CPI, the largest contributors to the annual rate of inflation during September 2020 were information and communication (-0.9 percentage points); housing rent (-0.9 percentage points); tobacco (0.5 percentage points) and vegetables (0.2 percentage points). • The monthly percentage change in the national CPI decreased to 0.1% in September 2020, after recording 0.5% in August 2020. – The largest contribution to the monthly rate of inflation came from vegetables (0.11 percentage points), dairy products (0.03 percentage points), information and communication services (-0.06 percentage points) and housing rent (-0.05 percentage points). Economic Update - October 2020 | 3
6. Public Finance • Government revenue (excluding grants) observed an increase of MVR381.6 million (or 29%) in August 2020 when compared with August 2019. Government Revenue and Expenditure, 2017 - 2020 (millions of rufiyaa) 3,500 3,000 2,500 2,000 – This was due to an increase in tax revenue despite the fall in non-tax revenue. As such, tax revenue increased by MVR417.5 million, while non-tax revenue decreased by MVR46.5 million. The annual increase in tax revenue largely reflected base effects stemming from the deadline for major taxes being deferred to August 2020 due to COVID-19 pandemic. In 2019, these deadlines fell into earlier months of the year. • Total expenditure (excluding amortisation) increased by MVR509.0 million (or 27%) in August 2020 when compared with August 2019. – The increase in expenditure stemmed from a significant increase in capital expenditure, which posted an increase of MVR521.4 million, whereas, recurrent expenditure decreased by MVR12.4 million. 1,500 1,000 500 0 -500 -1,000 -1,500 -2,000 2017 Balance 2018 Total revenue (excluding grants) 2019 2020 Total expenditure (excluding amortization) Source: Ministry of Finance Note: Figures do not accord with the methodology of IMF's GFS Manual 1986. • Overall, during the period January to August 2020, total revenue recorded a 39% decline, while total expenditure increased by 3% when compared with the corresponding period of 2019. • According to the latest available data, the stock of total government debt (excluding government guaranteed debt) amounted to MVR57.3 billion at the end of Q2-2020, a 3% increase from Q1-2020. Similarly, total government debt as a percentage of GDP1 increased to 84% at the end of Q2-2020. – During this period, the increase in government debt was primarily driven by domestic debt. 1 Nominal GDP is based on Scenario 5 of the COVID-19 Economic and Fiscal Impact paper presented to the People’s Majlis by the Ministry of Finance. (https://bit.ly/2Omegmx) Economic Update - October 2020 | 4
7. Monetary Developments Reserve Money • Annual reserve money (M0) growth remained negative and registered -4% in September 2020, after recording - 3% in August 2020. – Contrary to last month, the decline in reserve money stemmed from a significant fall in net domestic assets, while the net foreign assets of the MMA showed a significant increase. – Net domestic assets declined owing to an increase in ODF placements by commercial banks together with a marked slowdown in growth in net claims on the central government. Meanwhile, net foreign assets increased, reflecting an increase in foreign asset accumulation. Broad Money • Broad money (M2) growth accelerated to 10% in annual terms at the end of September 2020, after registering 8% during the previous month. – On the components side, the growth in broad money was primarily due to an increase in narrow money, which mainly reflected a rise in transferable deposits. Meanwhile, quasi money observed a decrease owing to a decline in foreign currency transferable deposits, despite increases in time and savings deposits denominated in both local and foreign currency. – As for the sources, broad money growth was driven by the increase in net domestic assets of the banking system, which stemmed from the rise in net claims on the central government by commercial banks and the MMA, as well as the increase in private sector credit. In contrast, despite the increase in foreign assets of the banking system, growth in net foreign assets posted a decline largely owing to a surge in foreign liabilities of both the MMA and commercial banks. Economic Update - October 2020 | 5
8. Credit to Private Sector • The annual growth of credit to the private sector by commercial banks remained at 8% at the end of September 2020, similar to the previous month. Meanwhile, monthly growth in credit to private sector decelerated to 1% after recording 3% in August 2020. – With regard to the composition of credit to the private sector, similar to the previous month, annual credit growth was observed in all main sectors, namely tourism, construction and real estate; except for transport and communication, and commerce sector. Likewise, credit extended as personal loans observed a significant increase over the period. – Credit extended to tourism sector observed the largest increase over the period, registering an annual growth of 11% during September 2020, mainly driven by the significant growth in credit in the form of working capital, together with credit lent for new resort development. Private Sector Credit, 2008 - 2020 (millions of rufiyaa, annual percentage change) 80 25,000 70 20,000 60 50 15,000 40 10,000 30 5,000 20 0 10 0 -5,000 -10,000 -10 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Private sector credit growth (right axis) Tourism Others Commerce Construction Real estate Personal loans Source: Maldives Monetary Authority Note: Personal loans were not classified as a separate category prior to June 2015. Economic Update - October 2020 | 6
9. Interest rates Interest Rate on Private Sector Loans and Advances , 2010 - 2020 (weighted average) 12 11 10 9 8 7 2010 2011 2012 2013 2014 2015 Foreign currency 2016 2017 2018 National currency 2019 2020 Source: Maldives Monetary Authority Interest Rate on Foreign Currency Deposits, 2010 - 2020 (weighted average) 5 4 3 2 1 0 2010 2011 2012 2013 Demand deposits 2014 2015 2016 Savings deposits 2017 2018 2019 Time deposits 2020 Source: Maldives Monetary Authority Economic Update - October 2020 | 7
10. External Trade • Total exports (f.o.b) registered a growth of 4% in September 2020 when compared with September 2019, while total imports (c.i.f) observed an annual decline of 48% during the period. Meanwhile, total exports observed a decline of 41% in monthly terms, while total imports also decreased by 10%. – The growth in total exports stemmed from a significant increase in re-exports, which offset a sizeable decrease in domestic exports. The decrease in domestic exports was primarily due to a fall in export earnings from frozen skipjack tuna, despite increases in canned or pouched tuna; and fresh or chilled yellowfin tuna exports. – As for the annual decline in total imports, the most significant decreases were observed in the imports of construction-related items, food items, petroleum products, and transport equipment and parts; although the decline was broad-based across all major import categories. In contrast, import of medical and surgical supplies observed a growth during the review month. Total Exports, 2017 - 2020 (millions of US dollars, annual percentage change) 50 200 40 150 30 20 100 10 50 0 0 -10 -50 -20 2017 2018 Total exports growth (right axis) 2019 2020 Fresh or chilled fish Frozen fish Canned or pouched fish Processed fish, nes Others Merchandise re-exports Source: Maldives Customs Service • Overall, during the period January to September 2020, total exports recorded a 21% decline, while total imports decreased by 32% when compared with the corresponding period of 2019. Economic Update - October 2020 | 8
11. Gross International Reserves • Gross international reserves increased to US$695.9 million at the end of September from US$569.6 million at the end of August 2020. – This was an increase of 31% and 22% when compared with September 2019 and August 2020, respectively. Economic Update - October 2020 | 9
12. International Economic Developments Global Output Economic Update - October 2020 | 10
13. Global Inflation Economic Update - October 2020 | 11
14. Commodity Prices Global Trade Economic Update - October 2020 | 12
15. Global Financial Markets Economic Update - October 2020 | 13
16. Global Financial Markets Economic Update - October 2020 | 14
17. Boduthakurufaanu Magu Male ’ - 20182 Republic of Maldives Tel: (960) 3312343 Fax: (960) 3323862 Email: mail@mma.gov.mv Website: www.mma.gov.mv