Sri Lanka economic growth 2026 is expected to slow moderately after a stronger rebound phase, even as macroeconomic stability and reform momentum continue to support the country’s medium-term outlook, according to a Standard Chartered country briefing.
Sri Lanka economic growth 2026 seen steady as reforms and stability anchor confidence
Sri Lanka’s post-crisis recovery is entering a more measured phase, with economic growth projected to moderate in 2026 amid ongoing reforms and improving macroeconomic fundamentals. According to Standard Chartered Bank’s latest Global Focus country briefing, gross domestic product growth is forecast at 3.5 percent in 2026, easing from an estimated 4.5 percent in 2025, reflecting a transition from rebound-driven expansion to steadier, reform-led growth.
The outlook remains constructive, underpinned by political stability, policy continuity and a broadly supportive macroeconomic environment. Inflation has remained relatively contained, creating space for lower interest rates that are expected to stimulate domestic demand. Remittance inflows continue to provide a reliable source of foreign exchange, while the recovery in tourism has strengthened external earnings and supported employment across related sectors.
Government capital expenditure is also expected to rise, helping to address infrastructure gaps and support longer-term productivity. Standard Chartered notes that private investment should gradually improve as supply-side constraints ease, confidence strengthens and financing conditions become more accommodative. Together, these factors are expected to sustain momentum even as headline growth moderates from recent highs.
Despite these supportive drivers, the report highlights several downside risks that could weigh on Sri Lanka’s near- to medium-term prospects. Infrastructure damage caused by Cyclone Ditwah poses immediate fiscal and logistical challenges, particularly for transport, utilities and agriculture-linked supply chains. In addition, limited fiscal space continues to constrain the government’s ability to respond aggressively to shocks or accelerate development spending without undermining consolidation efforts.
External financing conditions also remain tight. While Sri Lanka has made progress in stabilising its balance of payments, elevated financing needs and reliance on external inflows leave the economy exposed to shifts in global liquidity and investor sentiment. Global economic uncertainty, including slower growth in key export markets and volatile commodity prices, adds another layer of risk to the outlook.
Standard Chartered emphasises that continued fiscal consolidation and prudent debt management will be critical in navigating these challenges. Maintaining reform discipline is seen as essential to preserving hard-won gains in credibility and macroeconomic stability. The bank’s assessment suggests that policy slippage could quickly erode confidence, increase borrowing costs and weaken growth prospects.
On the external front, the current account surplus is projected to narrow to around 1 percent of GDP in 2026, down from an estimated 1.8 percent in 2025. This reflects stronger import growth in line with higher economic activity and investment demand. Nevertheless, remittance inflows and tourism earnings are expected to remain supportive, helping to cushion the impact of rising imports and maintain overall external balance.
Monetary policy is expected to remain steady throughout 2026. Standard Chartered forecasts that the Central Bank of Sri Lanka will keep policy rates unchanged, reflecting a balance between supporting growth and anchoring inflation expectations. Inflation is projected at approximately 4.5 percent, a level considered manageable and broadly consistent with macroeconomic stability.
The currency outlook points to gradual depreciation rather than sharp volatility. The Sri Lankan rupee is expected to weaken modestly over time, with the USD/LKR exchange rate projected at around 315 by the end of 2026. This trajectory reflects structural pressures, including import demand and external financing needs, while avoiding disorderly adjustments that could undermine confidence.
Overall, Sri Lanka economic growth 2026 is set to be defined less by rapid rebound and more by consolidation and reform execution. The pace of growth may moderate, but the underlying trajectory remains positive provided fiscal discipline, debt management and structural reforms continue. For policymakers and investors alike, the year ahead will test the country’s ability to convert short-term stabilisation into durable, inclusive growth.