Tourist arrivals in August 2021 increased significantly compared to the same period of last year. This reflected the base effect of the slow pickup in tourist arrivals in August 2020 despite opening of international borders in July 2020. During the month, the largest number of tourist arrivals were recorded from India, followed by Russia and Germany.
The rate of inflation remained below 1% recording 0.4% in August 2021. As such, contribution towards upward pressure on inflation stemmed mainly from the growth in price of dairy related products, vegetables and tobacco. Meanwhile, the upward pressure on inflation from the base effect of additional duties imposed on specific tobacco products in July 2020 had begun to wane during the period. On the other hand, the most significant negative contributor was information and communication services during this period.
In August 2021, the volume of fish exports increased by 46.8% when compared with August 2020. This was mainly driven by a significant increase in fresh, chilled, or frozen yellow fin tuna exports.
Real GDP growth
Real GDP is now estimated to decline severely by 33.5% in 2020 the due to the impact of COVID-19 pandemic. This is underpinned by a sharp decline in tourism sector and related sectors such as wholesale and retail trade; construction and real estate; as well as transport and communication. Going forward, real GDP is projected to grow by 20.8% in 2021.
Total revenue and grants
Total government revenue and grants decreased by MVR8.5 billion (or 37%) to MVR14.7 billion in 2020 when compared with 2019. This reflected a significant decrease in non-tax revenue, followed by a fall in tax revenue as well. Going forward, total revenue and grants is estimated to increase by MVR6.4 billion in 2021 and reach MVR21.1 billion, largely driven by the projected increase in non-tax revenue.
Total expenditure and net lending
Total expenditure and net lending increased by MVR1.6 billion (or 6%) to MVR30.6 billion in 2020 when compared with 2019. This reflected a significant surge in capital expenditure, while current expenditure observed a slight reduction during the year. Going forward, total expenditure and net lending is estimated to increase by MVR2.9 billion in 2021 and total MVR33.4 billion, largely driven by the projected increase in capital expenditure.
Overall fiscal balance in percent of GDP
The overall fiscal balance in percent of GDP widened to -27.7% in 2020 from -6.7% in 2019, driven by the sharp reduction in revenue during the year due to the impact of COVID-19 pandemic. However, the overall fiscal balance is projected to improve to -18.5% of GDP in 2021, reflecting the projected recovery of revenue for the year.
Annual broad money (M2) growth accelerated to 26% at the end of August 2021, after registering a growth of 21% in July 2021. This was primarily driven by an increase in quasi money, owing to a substantial increase in foreign currency denominated transferable deposits and national currency denominated other deposits. Similarly, narrow money observed a notable growth owing to an increase in transferable deposits.
Credit to private sector
Credit to the private sector by the commercial banks increased by 8% in annual terms at the end of August 2021, down from 9% in July 2021. Similar to the previous months, annual credit growth was observed for most of the major sectors including tourism, construction, and real estate sectors. Likewise, credit extended as personal loans and credit to transport and communication sector also recorded a significant increase over the period.
Overnight deposit facility (average)
During September 2021, average Overnight Deposit Facility (ODF) placements remained at MVR 4.4 billion. This marked a growth of 14% in annual terms, largely reflecting the increase in local currency liquidity due to monetization.
Official reserve assets
Official reserve assets increased to US$874.27 at the end of August 2021 from US$857.13 at the end of July 2021 recording an increase of 2%. In annual terms, official reserve assets observed a growth of 53% during this period.
Total exports (F.O.B) observed an annual decrease of 36% in August 2021 when compared to August 2020, while an increase of 67% was recorded in monthly terms. Fish exports increased by 47% in August 2021 compared to the previous month, while re-exports increased by 105% during this period.
Total imports (C.I.F) increased by 59% in annual terms in comparison to August 2020. Meanwhile in monthly terms a 23% increase in total imports can be observed, contributed by the increase in imports of food items; petroleum products; construction products: and transport equipment and parts. On the other hand, imports of machinery and mechanical appliances and parts decreased by 20% compared to July 2021.
Export of goods and service
In 2019, export of goods and services stood at US$3.7 billion, observing a 4% increase from US$3.6 billion recorded in 2018. This growth was largely driven by the export of services reflecting strong growth in tourism receipts, which offset the fall in domestic exports. However, due to a halt in global tourism activity following the COVID-19 pandemic, export of goods and services is estimated to decline by 57% to US$1.8 billion in 2020.
Balance on goods in percent of GDP
In 2019, balance on goods in per cent of GDP stood at -43%, down from -46% in 2018. This improvement reflected higher re-exports as well as lower imports. This balance is projected to fall and remain at -39% in 2020, due to combined effects of the decline in imports as well as the slowdown in re-exports and lower GDP growth.
Import of goods in percent of GDP
In 2019, imports of goods in percent of GDP stood at 49%, lower than the 52% recorded in 2018. This stemmed from the decline in imports largely due to a slowdown in construction-related imports. As imports are expected to be lower due to the pandemic, imports of goods in percent of GDP is projected to decelerate to 45% in 2020.
Current account balance in percent of GDP
The current account balance narrowed to -27% in 2019, driven by strong travel receipts and improvement in the merchandise trade deficit, which reflected the boost in re-exports together with a decline in imports. However, current account balance is estimated to widen to -30% in 2020.
At the end of August 2021, US Dollar reference rate of MMA stood at 15.41 Maldivian Rufiyaa (MVR) per US Dollar (US$).