2016 Index of Economic Freedom

Maldives

overall score53.9
world rank132
Rule of Law

Property Rights25.0

Freedom From Corruption21.9

Limited Government

Government Spending60.8

Fiscal Freedom94.0

Regulatory Efficiency

Business Freedom81.5

Labor Freedom70.4

Monetary Freedom73.0

Open Markets

Trade Freedom47.8

Investment Freedom35.0

Financial Freedom30.0

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Quick Facts
  • Population:
    • 0.3 million
  • GDP (PPP):
    • $4.9 billion
    • 5.0% growth
    • 4.9% 5-year compound annual growth
    • $14,383 per capita
  • Unemployment:
    • 11.6%
  • Inflation (CPI):
    • 2.5%
  • FDI Inflow:
    • $363.3 million
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The Maldives’ effort to modernize and upgrade its economic structures has been uneven. Public ownership is widespread in sectors other than tourism, and the public sector remains the largest source of jobs, employing over one-third of the labor force. Political instability and significant government interference in the economy continue to erode productivity and raise uncertainty.

Economic Freedom Snapshot

  • 2016 Economic Freedom Score: 53.9 (up 0.5 point)
  • Economic Freedom Status: Mostly Unfree
  • Global Ranking: 132nd
  • Regional Ranking: 28th in the Asia–Pacific Region
  • Notable Successes: Fiscal Freedom
  • Concerns: Rule of Law, Regulatory Efficiency, and Open Markets
  • Overall Score Change Since 2012: +4.7

Impediments to economic diversification and sustained private-sector growth persist, in large part due to institutional deficiencies such as corruption and the weak protection of property rights. Other weaknesses include chronically high government spending that perpetuates the inefficiency of the outsized public sector.

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Background

The military forced President Mohammed Nasheed to step down in February 2012 after several weeks of anti-government street protests instigated by former dictator Maumoon Abdul Gayoom. In November 2013, Gayoom’s half-brother Abdulla Yameen was elected president, putting an end to nearly two years of political turmoil. In March 2015, the court sentenced former President Nasheed to 13 years in prison based on allegations of terrorism, prompting large-scale protests among his supporters and cancellation of a planned state visit by the Indian prime minister. Tourism is the centerpiece of the economy and accounts for approximately 30 percent of GDP and more than 90 percent of government tax revenue.

Rule of LawView Methodology

Property Rights 25.0 Create a Graph using this measurement

Freedom From Corruption 21.9 Create a Graph using this measurement

Legal institutions have functioned more coherently in recent years, but political polarization and uncertainty, corruption in government procurement, and other corrupt behavior such as vote-buying have limited elected officials’ effectiveness in crafting policy and passing legislation. Civil law is used in most cases but is subordinate to sharia (Islamic) law in family and other civil matters. The inefficient judicial system is subject to political influence.

Limited GovernmentView Methodology

There is no personal income or corporate tax. Bank profits are subject to a profits tax. Overall tax revenue equals 24.5 percent of total domestic income. Government spending remains high and amounts to 36.1 percent of GDP. The chronic budget deficit exceeds 10 percent of total domestic output, and public debt has reached over 70 percent of GDP. Recent policy deviations have undermined joint IMF and World Bank debt relief programs.

Regulatory EfficiencyView Methodology

The overall regulatory environment is not conducive to new business formation or efficient operation. The labor market is underdeveloped. Much of the labor force is employed in the large public sector. Lack of competition in the market has inflated price levels and hurt the standard of living. The IMF estimates that increased spending on subsidies helped to drive the fiscal deficit to nearly 12 percent of GDP in 2014.

Open MarketsView Methodology

The Maldives’ average tariff rate is 21.1 percent. The government relies on tariffs for revenue. Quotas restrict agricultural imports including rice and sugar. Land may not be sold to foreign investors. Heavy bureaucracy in the investment approval process and political unrest hurt the already weak investment climate. Banking has expanded, but high costs and limited access to financial services contribute to sectoral shallowness.

Country's Score Over Time

Bar Graph of Maldives Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Maldives to other economic country groups Download Charts

Regional Ranking

rank country overall change
1Hong Kong88.6-1.0
2Singapore87.8-1.6
3New Zealand81.6-0.5
4Australia80.3-1.1
5Taiwan74.7-0.4
6Japan73.1-0.2
7South Korea71.70.2
8Malaysia 71.50.7
9Macau70.1-0.2
10Brunei Darussalam67.3-1.6
11Thailand 63.91.5
12Kazakhstan63.60.3
13Samoa63.51.6
14Philippines63.10.9
15Vanuatu60.8-0.3
16Azerbaijan60.2-0.8
17Sri Lanka59.91.3
18Tonga59.60.3
19Kyrgyz Republic 59.6-1.7
20Bhutan59.52.1
21Indonesia59.41.3
22Mongolia59.40.2
23Fiji58.8-0.2
24Cambodia57.90.4
25India56.21.6
26Pakistan 55.90.3
27Vietnam542.3
28Maldives53.90.5
29Bangladesh 53.3-0.6
30Papua New Guinea53.20.1
31China52-0.7
32Micronesia51.82.2
33Tajikistan51.3-1.4
34Nepal50.9-0.4
35Laos49.8-1.6
36Burma48.71.8
37Solomon Islands470.0
38Kiribati46.2-0.2
39Uzbekistan46-1.0
40Timor-Leste45.80.3
41Turkmenistan41.90.5
42North Korea2.31.0
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