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- GDP (PPP):
- $2.8 billion
- 7.4% growth
- 6.1% 5-year compound annual growth
- $8,731 per capita
- Inflation (CPI):
- FDI Inflow:
The Maldives’ economic freedom score is 49, making its economy the 149th freest in the 2013 Index. Its score has decreased by 0.2 point from last year, with a significant improvement in the control of government spending more than offset by declines in labor freedom, investment freedom, and monetary freedom. The Maldives is ranked 34th out of 41 countries in the Asia–Pacific region, and its overall score is below the world and regional averages.
The Maldives’ efforts to advance economic freedom have been uneven and fragile. Impediments to sustained private-sector growth and diversification 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. The government still plays a large role in the economy through state-owned enterprises, severely undermining entrepreneurship. Public ownership is widespread in every sector except tourism, and the public sector remains the largest source of jobs, employing over one-third of the labor force. Severe government impediments to economic interactions with the global economy continue to degrade productivity and raise costs.
The military forced President Mohammed Nasheed to step down in February 2012 after several weeks of anti-government street protests instigated by former Maldivian dictator Maumoon Abdul Gayoom. Nasheed had been elected president in the Maldives’ first-ever democratic election in 2008, replacing Gayoom, who had ruled the country for 30 years. Waheed Hassan Manik has been named interim president until new elections are held, most likely in 2013. The Maldives has largely recovered from the devastation caused by the 2004 Asian tsunami. Tourism is the centerpiece of the economy, contributing 28 percent of GDP in 2012 and over 90 percent of government tax revenue. Fishing employs about 11 percent of the labor force, and manufacturing provides less than 7 percent of GDP.
There is little private ownership of land, but land reform is being considered. The rule of law remains uneven across the country. The inefficient judicial system is subject to political influence, and application of laws is inconsistent. In February 2012, the president was removed from office at gunpoint and replaced by his vice president. Corruption remains prevalent throughout the economy.
There is no income or corporate tax. Bank profits are subject to a profits tax. Overall tax revenue is 11 percent of total domestic income. Government spending remains quite high at a level equivalent to 53.4 percent of GDP. The budget deficit has been chronically high at over 10 percent of total domestic output, and public debt has reached nearly 70 percent of GDP. Recent policy slippages have undermined joint IMF and World Bank debt programs.
The overall regulatory environment is not conducive to new business formation and operation. Although it takes only five procedures to launch a business on average, licensing requirements are time-consuming. 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, hurting the standard of living.
The government relies heavily on tariff revenues to fund its activities. The trade-weighted average tariff rate is prohibitively high at 20.6 percent, and non-tariff barriers add further to the cost of trade. Heavy bureaucracy in the investment approval process and political unrest hamper the already weak investment regime. Banking has expanded, but high costs and limited access to financial services contribute to the shallowness of the sector.