The World Bank in their latest South Asia Economic Focus has stated that the Maldives needs more robust fiscal reforms to sustain strong recovery.

The bank highlighted that Maldives’ economy recovered strongly last year driven by a rebound in tourism.

"poverty is expected to have fallen below pre-pandemic levels. But high external debt and tightened global financing pose risks to the country’s fiscal and external accounts," says the World Bank in its twice-a-year update, underscoring the need for more robust fiscal reforms

In the report, they also projected regional growth to average 5.6 percent in 2023, a slight downward revision from the October 2022 forecast. Growth is expected to remain moderate at 5.9 percent in 2024, following an initial post-pandemic recovery of 8.2 percent in 2021.

Also released today as a companion piece, the latest Maldives Development Update (MDU) projected the country’s economy to maintain strong growth, primarily due to an upswing in tourist arrivals, capital spending, and private consumption.

The Real GDP growth is projected at 6.6 percent in 2023. However, external and fiscal vulnerabilities pose significant risks to the economic outlook, including more expensive external borrowing and an uncertain global environment.

Inflation is expected to rise to 5.7 percent in 2023, mainly due to increased Goods and Services Tax (GST) rates. Despite government subsidies for fuel and food, global commodity prices will still impact households. However, inflation should decline to 2.5 percent over the medium term, largely due to projected decreases in oil prices.

“The Maldives' economic growth prospects have been encouraging, particularly in the tourism sector, which could still drive further expansion,” said Faris H. Hadad-Zervos, World Bank Country Director for Maldives, Nepal, and Sri Lanka. “However, a significant fiscal adjustment is needed. The government’s decision to raise taxes is a positive start, and should pave the way for additional necessary adjustment. A notable reduction in spending and expenditure reforms, coupled with effective revenue mobilization are crucial for Maldives’ debt and fiscal sustainability.”