Global rating agency Fitch expects Sri Lanka’s economic growth to rebound to 3.9% in 2024, with an average of 3.6% over 2025-2026, following a recovery in industrial and service sectors. This improvement comes after the economy contracted by 7% in the first half of 2023 but rebounded to 5.0% growth in the first half of 2024.
Fitch anticipates further easing of monetary policy through 2024-2026, as underlying inflation remains low. The Central Bank of Sri Lanka’s cumulative reduction of 725 basis points since June 2023 has helped contain inflation, which stood at 0.6% in August 2024.
Sri Lanka’s foreign-currency reserves reached USD 6 billion in August 2024, aided by the suspension of external debt service, rising tourism, and remittances. Despite a positive current account balance, the country remains in default on foreign debt obligations, and restructuring discussions are ongoing.
Fitch affirmed Sri Lanka’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘RD’ (Restricted Default) and Local-Currency IDR at ‘CCC-’. The rating agency highlighted that the domestic banking sector shows signs of stabilization, despite high non-performing loans.
Last modified: September 26, 2024
