The Maldivian economy has continued to demonstrate resilience despite mounting fiscal and external challenges, with tourism remaining the primary driver of growth, according to the World Bank's latest Maldives Development Update.
The report notes that economic activity expanded during the first quarter of 2025, with real Gross Domestic Product (GDP) growing by 2.5 percent compared to the same period a year earlier. Growth was supported by strong performances in public administration, construction, tourism, wholesale and retail trade, real estate and financial services. However, contractions in transportation, communications and the fisheries sector continued to weigh on overall economic performance.
Tourism remained the backbone of the economy, with visitor arrivals increasing by more than 9 percent during the first half of the year. While tourists spent fewer days in the country on average, the sector continued to generate substantial economic activity and foreign currency earnings, reinforcing its role as the Maldives' most important economic pillar.
The World Bank observed that stronger revenue collection and reductions in government expenditure helped improve the fiscal position during the first half of 2025. As of June, the state recorded a fiscal surplus of MVR 1.2 billion, equivalent to 1.1 percent of GDP. However, the institution cautioned that delayed payments to contractors and state-owned enterprises may have contributed to an accumulation of expenditure arrears.
Inflation averaged around 5 percent during the first six months of the year, driven largely by increases in food prices, fish prices and accommodation costs. At the same time, external pressures remained significant despite some improvements in foreign currency reserves. Official reserves rose to approximately USD 774.5 million following new foreign exchange regulations and financial arrangements with international partners, although usable reserves remained below one month of import coverage.
A major concern highlighted by the World Bank is the country's growing debt burden. Public and publicly guaranteed debt reached approximately USD 9.5 billion, equivalent to nearly 127 percent of GDP, while the Maldives continues to face a high risk of debt distress. The report points to limited financing options, persistent foreign exchange shortages and substantial upcoming debt repayments as key vulnerabilities facing the economy.
Despite these challenges, the World Bank projects medium-term growth of around 4 percent, supported by continued tourism activity and infrastructure expansion, including the benefits expected from increased airport capacity. Nevertheless, it warned that fiscal and external vulnerabilities remain elevated and that economic stability will depend heavily on continued reforms.
The institution called for a credible fiscal consolidation strategy centred on subsidy reforms, restructuring of state-owned enterprises, improved efficiency in public spending and prioritisation of major investments. It also stressed the importance of strengthening climate resilience and integrating climate considerations into public finance and development planning.
The World Bank further noted that the Maldives remains highly exposed to external shocks, particularly fluctuations in global tourism demand and commodity prices. However, it concluded that sustained reforms, prudent fiscal management and continued investment in resilience and competitiveness can help the country maintain economic stability and support long-term growth.
