Sri Lanka’s economy has shown signs of resilience and exceeded expectations in 2024, growing by 5% against the World Bank’s earlier forecast of 4.4%. The recovery, described as “remarkable” by the global financial institution, was largely driven by strong gains in the industrial and services sectors — especially in construction and tourism.
The update was published in the World Bank’s bi-annual Sri Lanka Development Update titled “Staying on Track”, released on 23 April. The report outlines that while the numbers reflect a strong rebound, the country’s road to complete recovery remains long and uneven. Growth for 2025 is expected to moderate to 3.5%, weighed down by the lingering effects of the economic crisis, structural challenges, and a turbulent global environment.
Despite positive headline growth, the World Bank noted significant socioeconomic concerns. Household incomes, employment levels, and overall welfare remain well below pre-crisis standards. The national poverty rate, an alarming 24.5% in 2024, paints a grim picture for a large segment of the population. Labour market challenges have led to a notable rise in emigration, as many seek better prospects abroad.
“While Sri Lanka’s economy is bouncing back stronger than expected, a significant portion of the population – about a third – remains in poverty or is at risk of falling back into poverty,” said David Sislen, World Bank Division Director for Sri Lanka. He emphasized the need for inclusive policies aimed at job creation and direct support for vulnerable groups.
The report underscores that medium-term progress hinges on maintaining macroeconomic stability and implementing critical structural reforms. These include measures to enhance trade, investment, competition, and female labour force participation. The World Bank projects Sri Lanka’s growth to slow further to 3.1% in 2026 unless key reforms are executed.
This analysis is part of the World Bank’s South Asia Development Update, a twice-yearly report assessing economic trends and policy challenges across the region. The April 2025 edition, titled “Taxing Times”, also notes that regional growth is expected to slow to 5.8% in 2025, down from earlier projections, with a modest rebound to 6.1% anticipated in 2026. The report highlights persistent fiscal limitations and low tax revenues as key vulnerabilities for South Asian economies, including Sri Lanka.