The Maldives Development Update (MDU) has released its latest findings, offering a comprehensive analysis of the Maldives' economy based on recent developments and medium-term outlooks. This update serves as a resource for policymakers, analysts, and professionals interested in the economic progression of the Maldives.
Tourism remains a primary driver of economic growth, with tourist arrivals reaching 2.05 million in 2024, an 8.9% increase from the previous year. This boost in tourism is linked to an estimated 5.5% growth in real GDP for the same period. Despite low overall headline inflation at 1.4% in 2024, recent months saw a rise, particularly in tobacco, restaurant, and accommodation prices, with food price inflation averaging 6.6%. Concerns arise as poorer households allocate substantial portions of their budgets to food.
The Maldives witnessed a widening trade deficit, with fish exports declining by 50% and goods imports rising by 4.0%, leading to a shortfall from US$3.1 billion in 2023 to US$3.3 billion in 2024. High import costs and debt repayments have affected reserves, which saw some recovery to US$832.1 million in February 2025 with aid from a currency swap with the Reserve Bank of India and new foreign exchange regulations for the tourism industry.
The fiscal deficit increased to 12.3% of GDP in 2024, up from 10.6% in 2023, due to rising recurrent expenditures and limited revenue growth. The government's fiscal reform agenda, announced in early 2024, aims to address these challenges but faces delays, affecting public debt and foreign reserves negatively.
Looking ahead, the completion of the new Velana International Airport terminal is anticipated to support further growth in tourist arrivals, with economic growth projected at 5.2% on average over the medium term. Without substantial fiscal adjustments, the fiscal deficit is expected to slowly decrease, with public debt predicted to rise to 135.7% of GDP by 2027. The current account deficit is projected to remain high, decreasing marginally by 2027 amidst ongoing external pressures.
The MDU emphasizes significant risks, including potential global trade uncertainties and economic slowdowns impacting tourism. These could limit redistribution efforts and affect economic opportunities, with possible implications for household purchasing power and essential import access. Fiscal adjustments and mitigation measures are highlighted as priorities to support household welfare while stabilizing the economy.
The Maldives Development Update continues to explore these and other issues, serving as a crucial tool for understanding the nation's economic trajectory.