Dominance of Tourism in Maldivian Economy

The Maldives is best known to the world for its beaches and underwater beauty. So it is no surprise that tourism is dominating the Maldivian economy. But dominance of the tourism industry in the Maldivian economy is alarming.

It constitutes around one third of the country’s GDP for the past two decades. Income from tourism (travel receipts) accounted for 91 percent of the country’s services income in the balance of payments. Income from tourism (e.g.: - bed tax) accounted for almost a quarter of government revenue in 2005.

Furthermore, tourism is an industry which is very much dependent on global stability. September 11 attacks and December 26th Tsunami affected the economy very badly.

The September 11 attacks affected the global economy and tourism of many countries. The Maldives economic growth in 2001 was positive but it was far less than the progress of previous years. The contribution of tourism to GDP in 2001 was nil and GDP growth was witnessed only on account of the progress in other minor industries.

The tsunami of December 2004 affected the Maldivian economy so badly that the country’s GDP declined by more than 5 percent in 2005. Maldives Monetary Authority indicates that the main reasons for a weak macroeconomic situation in 2005 is the tsunami.

The dependence of the economy on tourism is scary in terms of lost output when there is a global economic shock. We need to diversify our economy by expanding potential industries for a stable economy.

References
Quarterly Economic Bulletin June 2006, Maldives monetary Authority
Monthly Statistics November 2006, Maldives Monetary Authority