Investments in skills can realize the potential of services-led growth
MALE, Oct. 7, 2021-The Maldives’ recovery continues as tourism rebounded and targeted containment measures helped minimize the economic impacts of the recent waves of COVID-19. But the recovery remains fragile and uneven and the Maldives, like many countries, is far from pre-pandemic trend levels, says the World Bank in its twice-yearly regional update.
The latest South Asia Economic Focus titled Shifting Gears: Digitization and Services-Led Development projects the Maldives’ economy to grow by 22.3 percent in 2021, largely reflecting base effects, and by 11 percent in 2022. This forecast assumes that borders remain fully open with at least 1.1 million tourists expected to visit the islands in 2021, double the amount recorded in 2020, 65 percent of 2019 levels. Arrivals are expected to pick up steadily as global travel normalizes, driving real GDP to recover to 2019 levels by 2023. The poverty rate is expected to decline to 9.1 percent in 2021 and subsequently to 4.3 percent by 2023.
“The Maldivian economy is well on the road to recovery from the COVID-19 crisis. But to build back better and more resilient from this unprecedented shock, the country needs to focus on fiscal prudence to address debt vulnerability, economic diversification, and human capital investment,” said Faris Hadad-Zervos, Country Director of the World Bank for Maldives, Nepal, and Sri Lanka.
The COVID-19 pandemic has accelerated the digital transformation that was already underway in the Maldives, thanks to relatively high broadband and mobile internet penetration in the country. About 63 percent of the population used the Internet in 2019, a higher proportion than in other South Asian countries and peers outside the region.
To leverage the digital dividend, Maldives needs to address policy, legal, and regulatory gaps that currently inhibit the adoption of digital technologies. It also needs to boost Maldivians’ digital capabilities and skills to ensure that all Maldivians can take advantage of new technologies in an increasingly digital world.
“Countries in South Asia have a strong comparative advantage in exporting services, particularly business processes and tourism, whereas they have struggled to break into manufacturing export markets,” said Hans Timmer, World Bank Chief Economist for the South Asia Region. “To realize the potential of the services-led development, the region needs to rethink regulations and establish new institutions to support innovation and competitiveness.”