Sri Lanka’s export sector recorded a modest but encouraging performance in the first quarter of 2026, highlighting both underlying resilience and emerging vulnerabilities as global geopolitical tensions begin to reshape trade flows.
According to the Sri Lanka Export Development Board, total export earnings surpassed $4.3 billion, marking a 1.6% year-on-year increase, driven by steady merchandise demand and expanding services exports.
Merchandise exports grew 1.2% to above $3.3 billion, while services exports rose faster by 3.13% to $921.11 million, reflecting strong contributions from ICT, logistics, construction, and financial services.
However, this overall growth conceals a sharp slowdown in March, when total exports fell 5.2% year-on-year to $1.46 billion due to escalating geopolitical tensions in the Middle East.
The US-Israel conflict involving Iran and disruptions around the Strait of Hormuz triggered major shipping reroutes, delays, and increased freight costs, directly impacting Sri Lanka’s export logistics chain.
Some cargo shipments were diverted mid-transit or discharged at alternate ports, reducing export volumes and creating operational uncertainty for exporters dependent on predictable shipping schedules.
March merchandise exports declined 4.94% to $1.18 billion, while services exports dropped 6.26% to $286.92 million, signaling simultaneous weakness in goods movement and digital trade support services.
Month-on-month comparisons also revealed a steep 10.63% contraction from February, underscoring how quickly external shocks can disrupt Sri Lanka’s fragile export momentum.
Despite this setback, EDB leadership described the overall quarter as a demonstration of resilience, arguing that structural growth trends remain intact despite short-term volatility.
Coconut-based products, ICT/BPM services, food processing, and electrical and electronic components emerged as key growth drivers, partially offsetting declines in traditional export categories.
Yet analysts warn that Sri Lanka’s growing dependence on volatile global supply chains exposes it to sudden shocks, particularly those originating in strategically sensitive maritime corridors.
As the country seeks to position itself as a South Asian logistics hub, its exposure to shipping disruptions through the Middle East becomes an increasingly critical structural risk factor.
