IMF: Maldives’ real GDP growth projected to recover, rise to 4% in mid-2027

The Maldives’ real GDP growth is projected to recover in 2027 and return to its potential of around 4 percent over the medium term, assesses an International Monetary Fund (IMF) mission team that visited the Indian Ocean island nation last week.

The team, led by Piyaporn Sodsriwiboon, visited Male’ from June 4–14.

In a statement released on Wednesday following the visit, Sodsriwiboon noted that the Maldivian economy has navigated a challenging macroeconomic and financial environment with improved resilience.

She credited the Maldivian authorities for undertaking sizable fiscal consolidation effort through both revenue mobilization and expenditure controls this year, which she said helped contain financing pressures.

“Economic activity remained robust, supported by strong growth in tourism amid buoyant external demand. This, together with official bilateral support received, somewhat mitigated near-term external pressures and facilitated an increase in international reserves,” she said.

She also noted that despite elevated vulnerabilities, the Maldivian authorities have continued to meet their debt obligations, including timely repayments of sukuk bonds and loans from both official and private creditors.

But she said that while the financial system has been stable, sovereign–bank nexus remains elevated, which, in combination with other economic and policy settings, could pose macro-financial risks and constrain productive investment and growth.

Sodsriwiboon noted that amid high uncertainty, spillovers from the Middle East conflict have weighed significantly on the Maldives’ near-term outlook.

But while weaker tourism activity and higher global energy prices is expected to slow real GDP growth to about 1 percent this year, growth is projected to recover next year, and return to around 4 percent.

“Beyond 2026, growth is projected to recover in 2027 and would return to its potential of around 4 percent over the medium term,” she said.

Sodsriwiboon warned that downside risks continue to dominate, while external risks also remain salient.

“The recent debt repayments alleviated immediate solvency concerns, although the overall fiscal deficit and public debt are projected to stay elevated and the risk of overall and external debt distress remains high. Driven by higher import bills, the current account deficit would also widen further,” she said.

Sodsriwiboon stressed that the near-term policy priority should be to recalibrate the policy mix to sustainably address macroeconomic imbalances, put debt on a downward trajectory, and maintain financial stability, while protecting the most vulnerable.

“Restoring fiscal and debt sustainability would require credible, reform-based consolidation that restrains spending—building on the efforts to streamline capital spending in 2025—and strengthens revenue mobilization,” she said.

Sodsriwiboon said that given the surge in global oil prices amid the Middle East conflict, a systematic expenditure review of subsidy schemes will be essential to streamline costs and target vulnerable groups, guided by proxy means testing and strengthened administrative capacity and delivery systems.

“The ongoing reforms to improve energy efficiency and transition to renewable energy would also help reduce future subsidy costs. State-owned enterprises remain a material source of fiscal and governance risk, warranting stronger oversight and control. Enhancing the public financial framework remains crucial to improve fiscal policy credibility and effectiveness,” she said.

Sodsriwiboon welcomed the move by the Maldives Monetary Authority (MMA) to resume open market operations, adding that it should be continued to tighten monetary conditions.

“While the Foreign Currency Act has helped alleviate foreign exchange liquidity pressures and build international reserves, decisive macroeconomic adjustments are key to preserving the exchange rate peg and restoring stability. Vigilant oversight of the financial sector remains essential. Strengthening banking supervision and crisis management frameworks through upgrading central bank and financial sector laws and regulations would be crucial to enhancing financial stability and policy credibility,” she said.

Sodsriwiboon said that supply-side reforms to remove structural bottlenecks to growth, strengthen human capital and improve climate resilience are priorities for the Maldives over the longer term.

“Free trade and financial agreements with key bilateral partners have been steadily advanced, which would help diversify sources of external demand. Improving legal framework and governance is crucial to enhance the business climate and foster private sector development. Integrating climate sensitivity into public financial and investment management processes would be essential for enhancing climate investments and unlocking concessional climate financing,” she said.

The IMF team held meetings with Finance Minister Hassan Zareer, MMA Governor Ahmed Munawar and other senior government officials, as well as representatives from the private sector and development partners during the visit.