The Asian Development Bank (ADB) has cautioned that Sri Lanka’s GDP growth for 2025 is likely to be negatively impacted, regardless of the final outcome of ongoing US tariff negotiations. ADB Country Director Takafumi Kadono noted that even if a lower tariff rate is agreed upon, the rate will still be higher than what was previously in place, affecting key sectors such as apparel manufacturing.
Speaking to TV Derana, Kadono emphasized that the apparel sector, which employs approximately 300,000 people, is expected to feel the brunt of the tariff changes. “This translates to nearly a million individuals affected when accounting for household dependencies,” he said, adding that this could increase pressure on the government’s social protection systems and ultimately alter GDP projections.
The ADB had earlier forecasted Sri Lanka’s GDP to grow by 3.9% in 2025 and 3.4% in 2026. However, Kadono stated that these projections were made before reciprocal tariffs were proposed, and an updated outlook will be released in the coming months.
Beyond the immediate economic impact, Kadono urged Sri Lanka to treat the tariff development as a wake-up call to reform its trade strategy. He advised the government to reduce both tariff and non-tariff barriers, and to diversify its export base in order to attract more foreign direct investment (FDI) and ensure long-term growth.
The ADB is currently in early discussions with the Sri Lankan government to provide technical assistance in formulating a new export strategy. “We hope to engage further on industrial policies and export-oriented strategies to help strengthen the economy,” Kadono said.