Tourist arrivals increase 9 percent in June

Tourist arrivals increased 9 percent in June compared to the same period last year, reaching 83,347 guests, says the Maldives Monetary Authority’s (MMA) monthly economic review.

However, this is a decline of 9 percent when compared to the previous month,” read the economic review for June.

The annual increase in arrivals was contributed by the increase in the number of arrivals from both Asia and Europe. In June 2014, total bednights rose by 9 percent in annual terms while the average duration of stay remained unchanged at 5.6 days compared to June 2013.”

The occupancy rate meanwhile increased to 59 percent from 55 percent in June 2013.

Cash flow

The central bank also revealed that government securities – treasury bills and bonds – rose 18 percent in June compared to the same period last year, which was “contributed by the increase in the amount of T-bills issued by the government to manage its growing cash flow requirements.”

The monthly review noted that “the outstanding stock of T-bills held by commercial banks at the end of June 2014 increased both annually and monthly, whereas T-bills held by non-banks increased only annually.”

Finance Minister Abdulla Jihad had expressed concern last week with shortfalls in projected revenue posing difficulties “in managing the budget deficit” and affecting the government’s ability pay to civil servants.

“We try to make regular salary payments even if we have to take loans in order to do so,” he said, adding that the ministry was “trying to make the salary payments through any means possible.”

The MMA had previously warned that shortfalls in revenue and overruns in expenditure could jeopardise the country’s debt sustainability.

In May, MMA Governor Dr Azeema Adam called for “bold decisions” to ensure macroeconomic stability by reducing expenditure – “especially the untargeted subsidies” – and increasing revenue.

Fisheries, inflation and reserves

During June 2014, both the volume and earnings from fish exports increased compared to June 2013,” the monthly review revealed.

“As such, the volume of fish exports increased by 33 percent, while the earnings on fish exports rose by 6 percent during this period. The increase in the volume and earnings of fish exports was contributed mainly by the increase in export of frozen yellowfin tuna.”

The rate of inflation in the capital Malé meanwhile “accelerated slightly to 3.5 percent in June 2014 from 3.3 percent in May 2014,” which was “largely contributed by the acceleration in the growth of food prices, especially fish prices.”

In monthly terms, however, the rate of inflation “fell marginally” in June, “largely due to the fall in prices charged for furnishing, household equipment and maintenance, which off set the increase in fish prices during the review month.”

With imports increasing 19 percent while exports declined by 22 percent, the MMA revealed that the trade deficit widened by 27 percent in May compared to the same period in 2013.

Gross international reserves meanwhile “rose in both monthly and annual terms by 12 percent and 39 percent, respectively, and reached US$477.6 million at the end of June 2014.”

“This mainly reflects the temporary increase in foreign currency transfers by the commercial banks in the review period. As for reserves in terms of months of imports, it also increased in both monthly and annual terms and reached 3.1 months during the review month,” the report explained.

Quarterly business survey

The MMA’s Quarterly Business Survey for the second quarter of 2014 meanwhile noted that a majority of respondents from the tourism sector “indicated a decrease in total revenue, resort bookings and average room rates” during the current off-peak season.

While 10 percent of respondents indicated a decline in hiring and 83 percent reported no change, a majority reported “a decline in their financial situation” during the quarter.

“In analysing the factors which limit growth opportunities for businesses in the tourism sector, most businesses noted competition within the sector, issues with the regulatory framework, shortage of skilled labour and the high cost of finance as the most significant factors,” the survey found.

However, respondents expected revenue and average room rates to increase in the third quarter – “reflecting seasonal variations” – while most respondents expected “business costs such as labour and other input prices to increase in the next quarter”.

More respondents planned to increase capital investments than those who expected a decline, the survey found.

In July, the Ministry of Tourism revealed that tourist arrivals had reached half a million at the end of May, which was an 11.9 percent increase compared to the same period last year.

Moreover, the MMA revealed in its quarterly economic bulletin that tourism receipts in the first three months of the year increased by 10 percent compared to the first quarter of 2013, reaching US$801.1 million.

The bulletin noted that the 10 percent annual increase in arrivals was “entirely driven by the significant increase (24 percent) in arrivals from the Chinese market.”