In 2024, economic growth remained robust with an estimated real GDP growth of 5.5%, primarily driven by a strong performance in tourism, which saw a 7.1% growth in the first three quarters. Tourist arrivals increased by 8.9% to a record 2.05 million. However, headline inflation surged in the last quarter, averaging 1.4% for the year, with food inflation remaining elevated at 6.6%. The fiscal deficit widened to MVR 12.7 billion (11.7% of GDP) due to increased expenditure, while revenue collection rose by 3.7%. The current account deficit (CAD) remained high, with the trade deficit widening to US.3 billion. Foreign exchange reserves fell to critically low levels but recovered to US32.1 million by February 2025, supported by a currency swap agreement with the Reserve Bank of India. The financial sector's exposure to sovereign and state-owned enterprises (SOEs) debt increased, while credit growth to the private sector moderated. Public and publicly guaranteed (PPG) debt rose to US.4 billion (134.2% of GDP). Medium-term growth is projected to be 5.7% in 2025, supported by increased tourist arrivals due to the completion of a new terminal at Velana International Airport. Inflation is expected to rise, potentially increasing poverty unless targeted cash transfers are introduced. The fiscal deficit is likely to remain elevated, with public debt projected to rise to 135.7% of GDP by 2027. Significant downside risks include global trade uncertainties and elevated external and fiscal vulnerabilities. Urgent fiscal consolidation and a clear financing strategy are required to reduce vulnerabilities and ease liquidity pressures.