Sri Lanka’s economy has shown signs of stabilization, with growth projected at 4.4% in 2024, exceeding previous expectations, according to the World Bank‘s latest Sri Lanka Development Update. This follows four consecutive quarters of growth, primarily driven by the industrial and tourism sectors and supported by crucial structural and policy reforms.
The report, titled Opening Up to the Future, emphasizes that while the economic recovery is underway, it remains fragile. Sustained growth hinges on maintaining macroeconomic stability, restructuring debt, and continuing structural reforms to address poverty and vulnerabilities in the financial sector. Reforms aimed at increasing exports, attracting foreign investment, and enhancing female labor force participation are highlighted as key to boosting medium-term growth.
Sri Lanka has an estimated untapped export potential of $10 billion annually, which could create over 142,000 jobs. The report stresses the importance of trade in achieving higher, more sustainable growth and integrating the country into global value chains.
Looking Ahead The World Bank projects a more modest growth of 3.5% in 2025, with poverty levels expected to decline gradually but remain above 20% until 2026. Inflation is likely to stay below 5% in 2024, driven by the recovery in tourism and remittances. The report also notes that structural reforms will be crucial in maintaining this positive trajectory.
Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD.
Notes: e = estimate, f = forecast.
(a) Calculations based on SAR-POV harmonization, using 2019-HIES. Actual data: 2019. Nowcast: 2020-2023. Forecasts are from 2024 to 2026.
Last modified: October 11, 2024
