By: Staff Writer
June 16, Colombo (LNW): The World Bank has projected a notable upswing in Sri Lanka’s economic growth, forecasting a robust 3% expansion by 2026.
This optimistic outlook is contingent upon the successful execution of key initiatives, including debt restructuring negotiations and the implementation of structural reforms aimed at mitigating the adverse impacts of planned fiscal consolidation.
Based on the statement by the World Bank, it has been earlier reported that Sri Lanka is likely to witness a modest growth of 2.2 percent in 2024.
The 2.2 percent growth in 2024, marks a 0.5-percentage-point upward adjustment from January’s estimates.
Furthermore, the World Bank noted that the growth momentum in the South Asian Region surged to 6.6 percent in 2023, largely propelled by robust expansion in India.
Early 2024 continued to witness strong activity in India, albeit with private sector activity still subdued in several countries, including Pakistan and Sri Lanka.
In the case of Sri Lanka, following a contraction in 2023, economic activity has rebounded, supported by the recovery of tourism and remittances, albeit remaining below pre-pandemic levels.
Sri Lanka’s economy is projected to see moderate growth of 2.2 percent in 2024, showing signs of stabilization, following the severe economic downturn of 2022., the country still faces elevated poverty levels, income inequality, and labor market concerns, says the World Bank’s latest bi-annual update.
WB highlights that Sri Lanka saw declining inflation, higher revenues on the back of the implementation of new fiscal policies, and a current account surplus for the first time in nearly five decades, buoyed by increased remittances and a rebound in tourism.
However, poverty rates continued to rise for the fourth year in a row, with an estimated 25.9% of Sri Lankans living below the poverty line in 2023.
Labor force participation has also seen a decline, particularly among women and in urban areas, exacerbated by the closure of micro, small, and medium-sized enterprises (MSMEs).
Households are grappling with multiple pressures from high prices, income losses, and under employment. This has led to households taking on debt to meet food requirements and maintain spending on health and education.
“Sri Lanka’s economy is on the road to recovery, but sustained efforts to mitigate the impact of the economic crisis on the poor and vulnerable are critical, alongside a continuation of the path of robust and credible structural reforms,” emphasized Faris Hadad-Zervos, World Bank Country Director for Maldives, Nepal and Sri Lanka.
“This involves a two-pronged strategy: first, to maintain reforms that contribute to macroeconomic stability and second, to accelerate reforms to stimulate private investment and capital inflows, which are crucial for economic growth and poverty reduction.”
