One of the top three rating agencies in the world, Fitch Ratings has issued a sovereign credit rating for the Maldives.
This is the second sovereign credit rating to be received by Maldives, with the first rating published by Moody's Investor Services in September 2016. The Fitch rating for Maldives is one step above the Moody's rating.
Fitch has assigned a long term local and foreign-currency issuer rating of B+, with a Stable Outlook. This rating is comparable to the sovereign ratings of other developing nations at similar stages of development as the Maldives, including neighboring countries and other small island developing economies.
Fitch assigned the B+ rating based on the strong economic growth potential driven by a healthy outlook for the tourism sector. The rating highlights the potential for the ongoing projects such as the upgrading of the Velana International Airport and the development of Hulhumale' Youth City to boost tourism sector in the coming years. Fitch also highlights the prospects for fiscal balance, noting the strengths in generating revenue on the back of a strong tourism demand and the measures taken by the government to consolidate expenditures.
img:http://s2.psmnews.mv/images/660x400/14949322745124.jpg|Minister of Finance - Photo: PSM
At a press conference, Minister of Finance and Treasury Ahmed Munawwar said that the government acknowledges these factors and is taking actions to address these risks. The Minister said the government is facilitating the diversification and expansion of the economy with a legal framework more conducive to foreign investments through Acts such as the Special Economic Zones Act.
Furthermore, Minister Munawwar said that with these measures the Maldives is attracting more foreign direct investments, which is in turn strengthening government's reserves position. He reiterated that the government is committed to complete the program to rationalize recurrent expenditures towards a more sustainable path, and improve the ratings.
In the report, Fitch Ratings highlighted that The Maldives' success as a prime luxury tourist destination has generated relatively high GDP per capita of USD 9,145. Real GDP growth has proved volatile in the last few years, illustrating the dependency of the tourism sector on global growth. Fitch expects real GDP growth to pick up to 4.0% in 2017 and 4.5% in 2018, from 3.9% in 2016, due to continued tourism demand and construction.
New resorts are being built and the government has initiated large infrastructure projects. These include capacity expansion of the main airport; the construction of a bridge linking the capital to population centre; an advanced medical centre; and new housing. Some of these projects seem to have the potential to facilitate a surge in tourism in a few years, but execution of so many large projects at the same time has posed serious fiscal challenges.