World Bank Projections: Maldives Braces for 7.5% Inflation Spike This Year

The World Bank has forecasted a surge in inflation in the Maldives, estimating a rise to 7.5 percent in 2024. 

This projection is attributed chiefly to planned subsidy reforms for the year and their subsequent spillover effects.

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Outlined in the World Bank’s publication titled “Maldives Development Update: Scaling Back and Rebuilding Buffers”, released in May 2024, these projections shed light on the anticipated economic landscape for the nation.

The Maldives government has revealed plans for targeted subsidies, with the Ministry of Finance previously indicating a rollout scheduled for June of the current year. Notably, the State Budget for 2024 earmarks MVR 600 million for targeted subsidies. 

Under the proposed adjustments, the existing blanket subsidies covering electricity, fuel, staples, water, and sewerage services will transition to a direct transfer system. This shift aims to streamline subsidy allocation and is projected to reduce subsidy spending to MVR 2.5 billion.

The World Bank anticipates a moderation in inflationary pressures, forecasting a decline to 6.5 per cent in 2025 and further to 5 per cent in 2026. However, it underscores the susceptibility of these projections to risks stemming from potential oil price shocks or global production cuts.

In context, the Maldives experienced a modest inflation rate of 2.9 per cent in the Male’ area during 2023.