Maldives’ inflation expected to jump to 6% as Middle East conflict drives price surge

The World Bank projects that inflation in the Maldives will to jump to 6 percent this year, as the small island nation, almost entire dependent on imports, feels the affects of the conflict in the Middle East.

In its latest Maldives Economic Update report, the World Bank said that the high inflation reflects the surge in global commodity prices due to the conflict in the Middle East.

Consumer price inflation in the Maldives had increased from 1.4 percent in 2024 to 4 percent in 2025, driven by significant increases in food, fish, and tobacco prices.

The World Bank now projects that the inflation will rise further up to 6 percent this year.

The inflation rate is also expected to remain above 4 percent through 2028, due to intensified foreign exchange constraints and demand pressures for food and essential goods.

The World Bank warned that the elevated inflation is expected to disproportionately affect households in the atolls, where most of the country’s poor reside.

But the agency noted that the provision of subsidies on a wide range of items helped contain further inflationary pressures.

The World Bank warned that household welfare is vulnerable to recent price shocks, and further threatened by sustained conflict in the Middle East.

“The Maldivian economy's dependence on imports means that price shocks translate quickly into welfare losses: a 10 percent increase in food prices alone would raise the poverty rate by 1.6 percentage points,” said the agency.

The World Bank states that as a result of the Middle East shock, poverty is estimated to have increased by 0.5 percentage points, and vulnerability to poverty by 1.5 percentage points, driven by a decline in the real value of labor and non-labor income.

The Middle East conflict had come after a year of strong tourist arrivals and a recovery in fish exports in the Maldives, driving real GDP growth to 6.3 percent in 2025.

The US-Israeli war on Iran, which erupted on February 28, caused significant disruptions to tourism due to flight cancellations. This, compounded by higher fuel prices and tighter financing conditions, is expected to drive a sharp 0.7 percent decline in growth this year.

But despite the slowdown this year, the World Bank projects the growth to rebound to 6.7 percent next year, contingent on a recovery in tourist arrivals to pre-conflict levels by the fourth quarter of this year.