Sri Lanka's economy is showing signs of stabilization, with growth projected to reach 4.4 percent in 2024, according to the World Bank. This forecast surpasses earlier predictions and follows four consecutive quarters of growth driven by the industrial and tourism sectors. The positive outlook has been supported by critical structural and policy reforms.
The World Bank’s bi-annual Sri Lanka Development Update, titled "Opening Up to the Future," highlights that while recovery is underway, it remains fragile. The report emphasizes the importance of maintaining macroeconomic stability, restructuring debt successfully, and continuing structural reforms to boost medium-term growth and reduce poverty. Key areas for reform include boosting exports, attracting foreign investment, enhancing female labor force participation, improving productivity, and addressing issues like poverty and food insecurity.
The report notes that Sri Lanka has an untapped export potential estimated at $10 billion annually, which could create approximately 142,500 new jobs. There are opportunities for diversifying exports in manufacturing, services, and agriculture if necessary reforms are implemented.
"Sri Lanka's recent economic stabilization...is a significant milestone," stated David Sislen, World Bank Regional Country Director for Maldives, Nepal, and Sri Lanka. "At this moment...there is an opening for Sri Lanka to deepen its participation in global value chains...The continued implementation of important economic and governance-related reforms will allow Sri Lanka to fully benefit from this moment."
Looking forward, the report projects a modest growth rate of 3.5 percent in 2025 due to the lingering effects of the economic crisis. While poverty is expected to decline gradually, it may remain above 20 percent until 2026. Inflation is anticipated to stay below the central bank’s target of 5 percent in 2024 but may rise as demand increases. The current account surplus is likely to persist through tourism and remittances.
This update serves as a companion piece to the South Asia Development Update from October 2024 titled "Women, Jobs, and Growth." It projects South Asia's growth at 6.4 percent this year—the fastest among emerging markets globally—and suggests that increasing women's labor force participation alongside greater openness to trade could further accelerate regional development goals.
Source: World Bank