The World Bank has projected the completion of the new terminal at the Velana International Airport (VIA) to fuel real GDP growth by 5.7 percent this year.
According to the World Bank’s latest development update, real GDP growth is expected to pick up slightly over the medium term, supported by increased tourist arrivals due to the completion of the new terminal at VIA expected by mid-2025.
Real GDP growth is projected to be 5.7 percent in 2025, followed by 5.3 percent in 2026 and 4.7 percent in 2027, the update said.
“The baseline projections for medium-term growth are slightly higher than the forecasts in September 2024 due to better performance of the tourism sector,” it added.
The update said that the baseline outlook assumes a limited fiscal consolidation and some adverse impacts due to global trade uncertainties and a potential global economic slowdown.
According to the World Bank, the fiscal deficit is likely to remain elevated over the medium term, increasing the public debt stock further with debt service costs projected to increase significantly.
The update noted that the government has implemented some reforms on revenue mobilization in 2024, including revisions to the Tourism Goods and Services Tax (TGST), departure tax (DPT) and airport development fee (ADF), and green tax.
“To complement this and deliver on fiscal consolidation, it is critical to implement reforms to reduce expenditures, as identified in the government’s homegrown fiscal agenda in 2024,” it said.
The update stressed on the importance of phasing out existing blanket subsidies and replacing them with a targeted cash transfer scheme remains critical to address the fiscal challenges and make the social protection framework more progressive.
The current terminal at VIA has the capacity to handle 1.5 million passengers annually, while the Maldives last year hosted over 2 million tourists. Therefore, the airport is currently operating at overcapacity.
In stark contrast, the new terminal, encompassing 78,000 square meters, will accommodate over seven million passengers each year. The terminal is being developed with modern facilities. The government aims to bring the terminal into operation by October this year.