Maldives' economic growth slowed in early 2025, according to the latest Maldives Development Update released on October 30, 2025. The report notes that while tourist arrivals increased by 9.4 percent, shorter visitor stays contributed to weaker real GDP growth of 2.5 percent in the first quarter of the year. Inflation averaged 5 percent during the first half of 2025, mainly due to higher prices for food, fish, and accommodation.
Government expenditures were reduced in response to liquidity concerns, leading to a sharp decrease in capital spending. Despite higher revenue collections resulting in a fiscal surplus of MVR 1.2 billion (1.1 percent of GDP) at the end of June, there are indications that expenditure arrears have accumulated because of delayed payments to contractors and state-owned enterprises. Public and publicly guaranteed debt rose to US$9.5 billion or 126.9 percent of GDP, with increased reliance on domestic borrowing.
The report highlights ongoing external pressures facing the country. The current account deficit is expected to narrow to 15.3 percent of GDP this year as a result of higher fish exports and tourism receipts. Official reserves improved to US$774.5 million (covering about 1.8 months of imports) by July following a currency swap with the Reserve Bank of India and new foreign exchange regulations; however, usable reserves remain below one month’s worth of imports.
The Maldives remains at high risk for debt distress due to persistent foreign exchange shortages, limited financing options, and substantial near-term debt service obligations—including a US$500 million Sukuk repayment scheduled for 2026—which present significant solvency risks for the country’s economy. Credit rating downgrades and high market yields have further restricted access to external financing while banks’ exposure to government debt has grown considerably.
Fiscal challenges are compounded by delays in subsidy reforms, rationalization of capital expenditures, and restructuring state-owned enterprises (SOEs). Accumulation of arrears and continued use of untargeted subsidies continue to strain public finances. The Sovereign Development Fund's liquid balance was estimated at around US$80 million as of July—an amount considered insufficient for upcoming external debt payments.
Looking ahead, economic growth is projected at around four percent over the medium term as gains from expanded airport terminal capacity are offset by shorter tourist stays. Inflation is forecasted at an elevated rate—4.6 percent—in 2025 before gradually easing thereafter. The fiscal deficit is expected to widen again—to approximately thirteen percent of GDP—by 2026–27 which could push public debt up toward roughly one hundred thirty-five percent of GDP.
Risks remain significant for Maldives’ outlook: "External shocks to tourism, higher global commodity prices, or delays in fiscal reforms could further exacerbate fiscal and external vulnerabilities." According to the update: "A credible fiscal consolidation and financing strategy—centred on targeted subsidy reforms, SOE restructuring, improved health expenditure efficiency, and prioritised public investment—will be essential to restore macroeconomic stability."
For more information or past issues related to these updates or contact details for World Bank economists involved with this report can be found through official channels.