Introduction
The Maldives Monetary Authority (MMA) conducts the Quarterly Business Survey (QBS) to gauge current business trends and forecast future economic activities. This report focuses on the findings from Q2 2024, highlighting the performance and expectations across various sectors: tourism, construction, wholesale and retail trade, and transportation and communication.
Methodology
The QBS for Q2 2024 was conducted from June 25, 2024, to July 11, 2024, involving 165 enterprises from the aforementioned sectors. The survey achieved a response rate of 72%, with 118 enterprises participating. The responses, provided by senior managers, were used to assess changes in business variables such as sales, output, prices, capacity utilization, and employment. The qualitative responses were converted into quantitative indices by subtracting the percentage of respondents reporting a decrease from those reporting an increase, with the results weighted based on each business’s revenue within its sector .
Sectoral Analysis
Tourism Sector
Current Situation: The tourism sector experienced a significant decline in activity in Q2 2024. The total revenue index plummeted to -99, with 99% of businesses reporting decreased revenue. Resort bookings also dropped dramatically, with the index falling to -97 .
Employment: Employment levels in the tourism sector decreased, with the number of employees index falling by 69 points to -35. Average room rates and wages also saw substantial declines .
Prices: Input prices remained elevated despite a decrease in the average room rate. The input prices index fell 76 points to -19, reflecting lower operational costs but reduced pricing power for businesses .
Expectations for Q3 2024: Businesses are cautiously optimistic about Q3 2024, anticipating a slow improvement in activity as the off-peak season ends. However, they expect a continued decline in average room rates .
Construction Sector
Current Situation: The construction sector saw a contraction in Q2 2024. The volume of construction activity index turned negative, dropping 53 points to -17. Despite this, the volume of orders received increased, with the index rising by 52 points to 55 .
Employment: Employment levels declined significantly, with the number of employees index falling to -17. Wages and labor costs per employee also decreased but remained in positive territory .
Prices: Input prices continued to rise, with the index increasing to 69. Prices charged on average, however, decreased to 19, indicating pressure on profit margins .
Expectations for Q3 2024: Businesses expect a further contraction in Q3 2024, with the volume of construction activity index expected to fall to -13. Employment levels are anticipated to decline further, although the volume of orders is expected to increase slightly .
Wholesale and Retail Trade Sector
Current Situation: Activity in the wholesale and retail trade sector declined sharply in Q2 2024. The volume of sales index fell by 135 points to -85. Orders placed with suppliers also dropped, although the number of employees index showed improvement .
Employment: Employment levels rose, with the number of employees index surging to 78. Wages and labor costs per employee remained high despite a slight decline .
Prices: The cost of sales index turned negative, indicating reduced expenses for businesses. However, the average selling price index remained negative for the fifth consecutive quarter, highlighting persistent deflationary pressures .
Expectations for Q3 2024: The outlook for Q3 2024 is mixed, with the volume of sales expected to rise but the volume of orders placed with suppliers expected to decline. Businesses anticipate an improvement in the overall business situation but foresee worsening financial conditions .
Transportation and Communication Sector
Current Situation: Details about the current situation in this sector were not provided in the available excerpts.
Expectations for Q3 2024: Businesses in the transportation and communication sector are optimistic about business growth in the upcoming quarter .
General Insights
- Employment Trends: While the tourism and construction sectors faced significant employment declines, the wholesale and retail trade sector saw a notable increase in new hires during Q2 2024 .
- Price Trends: Input prices fell for the tourism and wholesale and retail trade sectors but rose for construction and transportation and communication. Average selling prices are expected to increase across all sectors except tourism, where a decline is anticipated .
- Financial Situation: The financial situation worsened for businesses across all sectors in Q2 2024. However, an improvement is expected in the next quarter, except for the wholesale and retail trade sector .
- Credit Conditions: Access to credit remained tight for all sectors in Q2 2024, with businesses expecting further tightening going forward .
Conclusion
The Q2 2024 survey highlights significant challenges across various sectors in the Maldives, with widespread declines in activity and mixed expectations for the upcoming quarter. While some sectors remain optimistic about future prospects, others anticipate continued difficulties, particularly regarding financial conditions and access to credit. This report underscores the need for targeted economic policies to support recovery and growth in the Maldivian economy.
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