International Monetary Fund (IMF) has projected that the Maldivian economy will begin recovering next year, following a slowdown in growth during 2026.

The forecast was published in a report issued after an IMF delegation visited the Maldives for 10 days from April 4.

According to the IMF, economic growth is expected to slow to one percent this year due to Middle East conflict resulting in higher global fuel prices and negative impact on tourism.

However, the report projects that growth will begin to recover in 2027 and return to around four percent in the medium term.

The IMF noted that while the repayment of major external debts and sovereign sukuk obligations this year has reduced the immediate risk of default, debt servicing pressures remain significant.

IMF also expects the current account deficit to widen further as import expenditure rises, driven by higher international oil prices.

To address these challenges and support long-term growth, IMF said Maldives should continue pursuing structural reforms, invest in human capital development, improve the business environment and strengthen climate adaptation measures.

The report also highlighted the importance of expanding trade and financial agreements with foreign countries, noting that such arrangements could support future economic activity, although they would also increase dependence on external markets.

The IMF further stressed the need to strengthen legal and administrative governance to improve the business climate and encourage private sector development.

Welcoming the Maldives Monetary Authority's decision to resume open market operations, the IMF said the policy should continue to support financial stability.

IMF also noted that transitioning to renewable energy would help deliver more sustainable economic growth while reducing subsidy expenditure during periods of volatile oil prices.

IMF reiterated the importance of continuing fiscal reforms introduced last year to reduce public debt and restore financial stability. These include reducing capital expenditure, increasing government revenue and reviewing the subsidy system to better target assistance to those most in need.

According to IMF, maintaining economic stability, managing public debt and strengthening state finances should remain key policy priorities, particularly amid global uncertainty, rising energy costs and challenges in accessing external financing.