Economy maintains momentum with 5% GDP growth in 2025 as Sri Lanka records its second consecutive year of expansion, reflecting a gradual recovery supported by improvements across agriculture, industry, and services.
Economy maintains momentum with 5% GDP growth in 2025 despite slower 4Q
According to the Department of Census and Statistics, the economy grew by 5.0% in 2025, maintaining the same pace as the previous year and marking a turnaround from the 2.3% contraction recorded in 2023. The latest National Accounts Estimates indicate that the recovery has gained traction, although growth moderated slightly in the final quarter of the year.
The Economy maintains momentum with 5% GDP growth in 2025 trend was underpinned by broad-based contributions from all major sectors. Agriculture, industry, and services expanded by 1.4%, 7.8%, and 3.3% respectively, demonstrating a steady, if uneven, recovery across the economy. At the same time, taxes less subsidies on products accounted for 11.6% of GDP, reflecting the role of fiscal components in overall output.
In real terms, Sri Lanka’s Gross Domestic Product at constant (2015) prices rose to Rs. 13,128,577 million in 2025, up from Rs. 12,508,954 million in 2024. At current prices, GDP increased by 8.8% to Rs. 32,750,844 million, indicating nominal growth driven by both volume expansion and price effects.
Despite the positive annual performance, quarterly data showed a slight moderation in momentum. The economy expanded by 4.8% in the fourth quarter of 2025, compared to 5.4% in the third quarter and 4.9% in the second quarter. Growth in the first quarter was also recorded at 4.8%, suggesting a relatively stable but slightly decelerating trajectory over the course of the year.
The Sri Lanka GDP growth profile in 2025 reflects the impact of several policy and macroeconomic developments. Notably, the easing of vehicle import restrictions contributed to improved business sentiment and increased activity in sectors such as wholesale and retail trade, financial services, and insurance. A relatively stable exchange rate environment and declining interest rates further supported economic activity, particularly in the latter part of the year.
Within the agriculture sector, growth of 1.4% represented an improvement from the 0.6% expansion recorded in 2024. This performance was driven by gains in several sub-sectors, including plant propagation, forestry and logging, animal production, and coconut cultivation. Paddy production also recorded moderate growth, alongside increases in sugar cane, tobacco, fruits, tea, and spices.
However, adverse weather conditions weighed on certain agricultural activities. Declines were recorded in vegetable cultivation, rubber production, and freshwater fishing and aquaculture, highlighting the sector’s continued vulnerability to climatic factors.
Industrial activity remained a key driver of overall growth, expanding by 7.8% in 2025. Although this was lower than the 11.1% growth recorded in the previous year, it still represented a strong contribution to GDP. Construction and mining and quarrying were among the standout performers, growing by 9.2% and 16.9% respectively.
Manufacturing also posted solid gains, with overall growth of 6.2%. Key sub-sectors such as petroleum refining, non-metallic mineral products, and fabricated metal products recorded double-digit growth rates. Other segments, including textiles, food processing, and wood products, also contributed positively, reflecting a broad-based expansion across the manufacturing landscape.
The Economy maintains momentum with 5% GDP growth in 2025 narrative is further supported by improvements in utilities and infrastructure-related activities. Electricity generation and water supply services recorded growth of 9.2% and 5.7% respectively, while waste management services expanded by 8.1%.
The services sector, which accounts for the largest share of the economy, grew by 3.3% in 2025, up from 2.4% in the previous year. Growth was led by insurance, reinsurance, and pension funding activities, which expanded by 14.6%. Information technology services also recorded strong growth at 12.8%, highlighting the increasing importance of digital sectors in the economy.
Tourism-related activities showed notable improvement, with accommodation, food, and beverage services growing by 12.4%. Financial services expanded by 10.6%, while transportation, telecommunications, and real estate activities also recorded moderate gains. Public administration and defence was the only major services category to contract during the year.
The Sri Lanka economic growth 2025 performance also reflects a more stable macroeconomic environment compared to previous years. Inflation, while rising during the third quarter, remained relatively contained, and monetary conditions eased with declining interest rates. These factors contributed to improved investor confidence and supported consumption and investment activity.
In the fourth quarter, GDP at constant prices increased to Rs. 3,414,142 million, up from Rs. 3,256,900 million in the corresponding period of 2024. At current prices, GDP rose by 10.0% to Rs. 8,700,316 million. Sectoral performance in the quarter remained consistent with annual trends, with agriculture growing by 2.1%, industry by 7.3%, and services by 3.1%.
Looking ahead, sustaining growth momentum will depend on continued macroeconomic stability, policy consistency, and resilience to external shocks. While the Economy maintains momentum with 5% GDP growth in 2025 outcome signals a positive trajectory, challenges such as global economic uncertainty, climate-related risks, and structural constraints will need to be carefully managed.
Overall, the data suggests that Sri Lanka’s economy is on a gradual recovery path, supported by sectoral diversification and improving economic fundamentals. Maintaining this momentum will require a balanced approach that supports growth while ensuring stability in an increasingly complex global environment.