The Maldives enters 2026 facing a sharp loss of economic momentum after a strong 2025, with new World Bank projections showing growth slowing from 6.3 percent last year to just 0.7 percent this year.
The shift marks a rapid reversal from a year in which tourism reached a record high and fisheries recovered from earlier sectoral disruptions. Tourist arrivals rose by 9.8 percent in 2025 to 2.25 million, the highest on record, while fish exports rebounded strongly after a difficult 2024 period. Together, these trends helped real GDP growth recover from 3.5 percent in 2024.
The outlook for 2026, however, is now shaped by external pressures. The World Bank attributes the expected slowdown largely to disruption in tourism linked to the conflict in the Middle East, including flight cancellations caused by airspace restrictions. These pressures are being compounded by higher fuel prices and tighter financing conditions, increasing the cost of operating a tourism- and import-dependent economy.
The weakness had already begun to appear in early 2026. Arrivals increased by 4.6 percent in January and 15.7 percent in February, but then fell by 20.7 percent in March and 24.4 percent in April compared with the same months last year. The fall was particularly notable in European markets, which remain central to the Maldives’ high-value tourism base.
The World Bank’s baseline assumes that tourist arrivals will return to pre-conflict levels only by the fourth quarter of 2026. Under that assumption, growth is projected to rebound to 6.7 percent in 2027 before easing to 4.0 percent in 2028. This means the 2027 recovery is not guaranteed; it depends heavily on how quickly flight connectivity, traveller confidence and source-market demand recover.
The slowdown also comes at a time when domestic buffers remain limited. Inflation rose to an average of 4.0 percent in 2025, up from 1.4 percent in 2024, driven by higher food, fish and tobacco prices. The World Bank expects inflation to rise further to 6.0 percent in 2026 as global commodity prices increase and foreign exchange constraints place further pressure on imported essentials.
The fiscal picture also remains difficult. Although the fiscal deficit narrowed in 2025 to 4.3 percent of GDP, the improvement was largely linked to revenue gains and a sharp fall in capital spending on a cash basis. The World Bank expects the deficit to widen again to 10.9 percent of GDP in 2026 as weaker tourism revenue and higher subsidies weigh on public finances.
The report also points to renewed external pressure. The current account deficit narrowed significantly in 2025 to 7.5 percent of GDP, supported by tourism receipts, fish exports and lower imports. But it is expected to widen to 20.6 percent in 2026 as tourism receipts decline and import costs rise. That deterioration could add further pressure to foreign exchange liquidity, official reserves and businesses reliant on dollar access.
For policymakers, the central issue is that the economy’s recovery path is tied to a narrow set of variables outside domestic control: tourism flows, air routes, energy prices and access to external financing. The World Bank warns that a prolonged conflict in the Middle East could deepen the impact by disrupting supply chains, raising the cost of essential imports and weakening household incomes.
The 2025 performance therefore gives only part of the picture. The Maldives ended the year with record arrivals and stronger growth, but 2026 is likely to test how resilient that expansion is when tourism, fuel and financing conditions move against the country at the same time.
