Global financial ratings provider Fitch Ratings says it expects the Maldivian economic growth to recover in 2021 despite its own credit downgrading of the island nation last year.
Fitch said that despite the growth projected for this year, the country is unlikely to return the sovereigns to pre-pandemic levels of creditworthiness on its own.
It said the Maldives, along with Sri Lanka and Laos all have lingering health vulnerabilities to the pandemic, high general government debt/GDP burdens, and limited external financing access also weigh on their credit metrics.
The credit ratings agency had downgraded the credit ratings for all three Asian countries last year and had downgraded the IDRs of three Asia-Pacific sovereigns to ‘CCC’ in 2020.
Fitch said that it expects the three economies to post current-account deficits in 2021-2022.
However, it said that the path of the pandemic and its impact on tourism, a major source of foreign exchange for all three countries, will heavily influence the prospects for external earnings.
Fitch noted that external liquidity stress may be relieved by financing support and highlighted that the Maldives secured significant multilateral funding in 2020.
Fitch added that the Maldives has gained access to the G20 Debt Service Suspension Initiative, and believes such support will continue in 2021-2022.
