ADB Projects Maldives Growth to Slow Sharply to 1.0% as Middle East Conflict Bites

The Asian Development Bank dramatically revised its growth forecast for the Maldives downward in its April 2026 Asian Development Outlook, projecting GDP growth of just 1.0% for the year — a sharp reduction from the 5.4% expansion it had forecast in its December 2025 update. The downgrade reflects the cascading economic effects of the escalating Middle East conflict on the Maldives' tourism-dependent economy.

The ADB identified three primary transmission channels through which the conflict is dampening Maldivian growth. First, disrupted air routes and security concerns have reduced arrivals from Gulf Cooperation Council countries by an estimated 31% year-on-year. Second, elevated global energy prices have pushed up fuel import costs, with the state fuel company STO absorbing losses of approximately $45 million in the first quarter alone. Third, tighter global financial conditions have constrained the government's ability to access international capital markets for refinancing.

Inflation is projected to rise to 5.0% by year-end, up from 2.8% in 2025, driven primarily by imported food and fuel costs. The Maldives Monetary Authority has limited tools to combat inflation given the fixed exchange rate regime, leaving fiscal policy as the primary adjustment mechanism. The ADB recommended accelerating subsidy reforms and broadening the tax base through implementation of the long-delayed income tax on high earners.

Despite the grim headline figures, the ADB noted that the Maldives' early-year tourism performance had exceeded expectations, with record arrivals in January and February providing a partial buffer. The bank projected a recovery to 4.2% growth in 2027, contingent on de-escalation in the Middle East and successful completion of new resort developments in the pipeline.