The Asian Development Bank (ADB) has forecasted that the Maldives' economic growth will slow significantly due to the ongoing conflict in the Middle East, with the economy expected to grow by just one percent this year.
While the Maldivian economy saw a growth of 5.4 percent last year, the ADB estimates this figure will drop to one percent this year. However, the bank projects a modest recovery with approximately three percent growth expected next year.
“Maldives successfully repaid its sukuk on April 2, but challenges remain. Lower tourism revenue and higher fuel prices raise pressures on the government budget, making fiscal reforms all the more urgent," said ADB Senior Economist Jules Hugot.
In a report released on Friday, the ADB stated that the primary reasons for the projected economic slowdown are the decline in tourism and the surge in global fuel prices resulting from the conflict.
When the Middle East conflict began on February 28, the local council elections were fast approaching. Rather than implementing cost-cutting measures at the onset of the crisis, the government created thousands of new jobs and spent heavily on election campaigning.
Following the suspension of the conflict, the government has begun implementing austerity measures. These include staff layoffs, reductions in overtime pay, and cutting down official working hours.
