Sri Lanka’s economy is on the path to recovery, with the World Bank projecting a growth rate of 4.4% for 2024, surpassing previous estimates. This forecast follows four consecutive quarters of growth, largely driven by the industrial and tourism sectors, alongside crucial structural and policy reforms.
David Sislen, the World Bank’s Regional Country Director for Sri Lanka, Maldives, and Nepal, remarked, “Sri Lanka’s recent economic stabilisation, marked by sustained growth and a current account surplus in 2023, is a pivotal milestone. The country now has a real opportunity to realise its export potential, which we estimate at $10 billion annually.”
He added, “Sri Lanka can leverage its strategic location and evolving global trade dynamics to deepen its participation in global value chains, create jobs, and sustain growth. Continued reforms in economic policy and governance are key to seizing this opportunity.”
The latest bi-annual Sri Lanka Development Update, released by the World Bank under the theme Opening Up to the Future, highlights the fragile nature of the recovery. It emphasizes the importance of ongoing debt restructuring efforts and reforms to sustain medium-term growth and reduce poverty.
To fully harness its export potential, estimated to generate around 142,500 new jobs, Sri Lanka must implement key reforms aimed at boosting export capacity, attracting foreign investment, increasing female labour force participation, and improving productivity. Tackling challenges like poverty, food insecurity, and financial sector vulnerabilities remains essential to achieving inclusive and sustainable growth.
Looking ahead, the report projects a more modest growth rate of 3.5% for 2025, with economic recovery expected to proceed gradually due to the lingering effects of the recent crisis. Poverty levels are predicted to decline slowly but will remain above 20% until 2026.
Inflation is forecast to stay below the Central Bank’s target of 5% for 2024, rising gradually as demand recovers. The current account is expected to maintain a surplus in 2024, driven primarily by tourism and remittances.
This Sri Lanka Development Update complements the broader South Asia Development Update from the World Bank, which projects the South Asia region to grow at 6.4% in 2024, making it the fastest-growing emerging market and developing economy (EMDE) region globally.