Crisis Impact Dampens Sri Lanka’s Economic Recovery
Sri Lanka’s economic recovery is set to slow significantly in 2025, with growth projected to decelerate to 3.5%, according to the World Bank’s latest Global Economic Prospects report. The lingering crisis impact from the country’s recent economic turmoil continues to weigh heavily on its growth prospects, compounded by structural weaknesses and a volatile global environment.
Moderating Growth Reflects Crisis Impact and Structural Barriers
Despite a rebound in industrial output and construction activity in 2024, Sri Lanka’s growth is expected to moderate this year. The World Bank attributes this slowdown primarily to the ongoing crisis impact, alongside structural barriers and challenging external conditions limiting the pace of recovery.
South Asian Neighbors Outpace Sri Lanka Amid Crisis Impact
While Sri Lanka grapples with the fallout of the crisis impact, several South Asian economies are forecast to achieve stronger growth. India is expected to expand by 6.3% in FY25/26, with Pakistan and Bangladesh projected to grow by 3.1% and 4.9%, respectively. Regional growth is anticipated to ease to 5.8% in 2025 before rebounding to 6.2% in 2026-27.