Finance Minister Hassan Zareer has announced that the Maldives' economic growth is projected to slow significantly this year to between 0.6% and 1.8%, driven by the adverse impacts of the conflict in the Middle East.
The government had previously forecasted an economic growth rate of 5.3% for the year. However, these estimates have been drastically revised following major shocks to the international landscape.
The sharp decline in economic momentum is attributed to the closure of transit hubs in the Middle East used by European tourists. During that period, tourist arrivals plummeted. Although there has been some recovery since that initial dip, it is now certain that arrival figures will fall short of earlier projections. Current estimates suggest that arrivals may not even reach last year's levels.
Presenting the budget statement to the People's Majlis, Zareer described the Iranian conflict as the third major shock to the Maldives' public finances in the past decade. He noted that the war directly impacted Maldivian tourism by disrupting travel routes, driving up fuel prices, and leading to a reduction in airline frequencies.
"However, towards the end of the first quarter, a major war shook the global economy. This is the third major shock to the Maldives' finances in the last ten years," Zareer said.
Describing the economic situation, Zareer noted that while tourism performed well in December of last year and through January and February of this year, the sector saw a 23% decline in March and April. Consequently, year-to-date tourism performance remains 3.6% lower than the previous year.
The government now estimates that 2.17 million tourists will visit by the end of the year. This represents a 3.5% decrease compared to the 2.25 million tourists who visited last year.
