2018 Index of Economic Freedom

Maldives

overall score51.1
world rank155
Rule of Law

Property Rights45.0

Government Integrity36.6

Judicial Effectiveness38.8

Government Size

Government Spending45.5

Tax Burden94.3

Fiscal Health6.7

Regulatory Efficiency

Business Freedom78.6

Labor Freedom70.6

Monetary Freedom83.3

Open Markets

Trade Freedom48.4

Investment Freedom35.0

Financial Freedom30.0

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Quick Facts
  • Population:
    • 0.4 million
  • GDP (PPP):
    • $5.5 billion
    • 1.9% growth
    • 4.0% 5-year compound annual growth
    • $15,553 per capita
  • Unemployment:
    • 3.2%
  • Inflation (CPI):
    • 0.9%
  • FDI Inflow:
    • $448.0 million
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The Republic of Maldives’ economic freedom score is 51.1, making its economy the 155th freest in the 2018 Index. Its overall score has increased by 0.8 point, with improvements in monetary freedom, judicial effectiveness, and government integrity offsetting declines in the government spending, fiscal health, and business freedom indicators. The Maldives is ranked 39th among 43 countries in the Asia–Pacific region, and its overall score is below the regional and world averages.

The Maldives’ economy has benefited from rapid growth in its fisheries sectors and tourism-related industries. Higher foreign exchange reserves from tourism have helped to fund increases in construction-related imports. To ensure against future boom-and-bust cycles, the economy needs greater diversification to protect it from global slowdowns. Other reforms to improve the business environment are also needed, as are reforms in public finance and stronger efforts against corruption, cronyism, and a growing drug problem.

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Background

The Maldives archipelago lies southwest of India in the Arabian Sea. The military forced democratically elected President Mohamed Nasheed to step down in 2012 after antigovernment street protests instigated by former dictator Maumoon Abdul Gayoom, who had been in power for 30 years. In 2013, Gayoom’s half-brother Abdulla Yameen was elected president. In 2015, Yameen’s government sentenced former President Nasheed to 13 years in prison based on dubious allegations of terrorism, prompting large-scale protests and cancellation of a planned state visit by India’s prime minister. Maldives has quickly become a middle-income country, driven by the rapid growth of its tourism and fisheries sectors. As calls for Western sanctions have intensified, Yameen has turned increasingly to Chinese and Saudi Arabian investment.

Rule of LawView Methodology

Property Rights 45.0 Create a Graph using this measurement

Government Integrity 36.6 Create a Graph using this measurement

Judicial Effectiveness 38.8 Create a Graph using this measurement

Secured interests in movable and real property are recognized and enforced, but property rights are generally weak. Most land is owned by the government and then leased to private owners or developers. Although legally independent, the judiciary is subject to influence amid numerous allegations of judicial impropriety and abuse of power. Officials frequently engage in corrupt practices with impunity.

Government SizeView Methodology

The Maldives government levies no personal income or corporate tax. Bank profits are subject to a profits tax. The overall tax burden equals 23.9 percent of total domestic income. Over the past three years, government spending has amounted to 42.6 percent of total output (GDP), and budget deficits have averaged 9.0 percent of GDP. Public debt is equivalent to 81.5 percent of GDP.

Regulatory EfficiencyView Methodology

Ongoing infrastructure construction may enhance the ease of doing business as it is completed, but the high public debt and external debt used to finance it are a fiscal risk. The large public sector is a major employer. The country is susceptible to slowdowns in the advanced economies that fund its sizable tourism sector. The government sharply reduced subsidies in 2016.

Open MarketsView Methodology

Trade is extremely important to the economy of the Maldives; the combined value of exports and imports equals 183 percent of GDP. The average applied tariff rate is 20.8 percent. Nontariff barriers impede some trade. Government openness to foreign investment is below average. Banking has expanded, but high costs and limited access to financial services contribute to sectoral shallowness.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Hong Kong90.20.4
2Singapore88.80.2
3New Zealand84.20.5
4Australia80.9-0.1
5Taiwan76.60.1
6Malaysia 74.50.7
7South Korea73.8-0.5
8Japan72.32.7
9Macau70.90.2
10Vanuatu69.52.1
11Kazakhstan69.10.1
12Thailand 67.10.9
13Philippines65-0.6
14Azerbaijan64.30.7
15Indonesia64.22.3
16Brunei Darussalam64.2-5.6
17Tonga63.10.1
18Kyrgyz Republic 62.81.7
19Fiji62-1.4
20Bhutan61.83.4
21Samoa61.53.1
22Cambodia58.7-0.8
23Tajikistan58.30.1
24China57.80.4
25Sri Lanka57.80.4
26Solomon Islands57.52.5
27Mongolia55.70.9
28Papua New Guinea55.74.8
29Bangladesh 55.10.1
30India54.51.9
31Pakistan 54.41.6
32Nepal54.1-1.0
33Burma53.91.4
34Laos53.6-0.4
35Vietnam53.10.7
36Micronesia52.3-1.8
37Uzbekistan51.5-0.8
38Afghanistan51.32.4
39Maldives51.10.8
40Kiribati50.8-0.1
41Timor-Leste48.11.8
42Turkmenistan47.1-0.3
43North Korea5.80.9
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