The Asian Development Bank has forecast that economic growth in Maldives will decline by 1 percent this year, citing the impact of the Middle East conflict.
What is driving the slowdown
In its Asian Development Outlook, the ADB said the economy grew last year, supported by tourism and fisheries. However, growth is expected to slow due to disruptions linked to the conflict, including pressure on tourism, higher fuel prices, and a likely decline in the fisheries sector.
Outlook for next year
The report estimates inflation will increase to 5 percent this year, driven mainly by rising fuel costs and the higher cost of foreign currency.
The ADB projects that growth could recover to 3 percent next year if conditions stabilise and fuel prices ease. Inflation is expected to moderate slightly to around 4 percent.
Pressure on finances
The report notes that the situation could place pressure on government finances. Fuel subsidy costs are expected to rise to around USD 110 million, while tourism revenue could decline by about USD 65 million.
Overall state revenue is projected to be 6.7 percent lower than initial budget estimates.
The ADB said higher borrowing and a widening budget deficit could pose challenges. It also warned that if foreign currency reserves are not strengthened while the conflict continues, Maldives could face broader economic risks.
