Sri Lanka’s digital economy has reached an estimated Rs. 1,342 billion, accounting for 4.5% of the nation’s GDP, according to the Institute of Policy Studies (IPS) in its State of the Economy 2025 report. The study underscores the expanding role of digital technologies in reshaping trade, services, and employment, marking a major milestone in the country’s transition toward a technology-driven economy.
The IPS highlights that digital businesses and online platforms are propelling innovation, reducing transaction costs, and enhancing productivity across industries. The report identifies information and communication services as a leading growth driver, contributing Rs. 606.7 billion, or 2.03% of GDP, while e-commerce now accounts for Rs. 735.2 billion, or 2.47% of GDP.
According to the report, Sri Lanka’s shift toward digitalization gained momentum during the COVID-19 pandemic, which accelerated demand for online solutions, remote work, and e-services. The ICT-BPO sector—a core pillar of the digital economy has grown exponentially since 2015, with the number of firms tripling and the workforce doubling to over 124,000 by 2018.
The IPS projects the sector will employ 300,000 professionals by 2025 and generate $2 billion in export earnings, while supporting over 1,000 tech startups and creating a competitive edge in the regional digital marketplace.
E-commerce, in particular, has emerged as a powerful growth engine. In 2024, Sri Lankans spent Rs. 367.8 billion through debit and credit card-based transactions, while the total e-commerce market value including cash payments was estimated at Rs. 735.2 billion. The IPS projects a 10.8% annual growth rate, with the market expected to reach $3.9 billion by 2029.
The report notes that 52% of internet users now make online purchases at least once a month, signaling a significant shift in consumer habits. Digital advertising has become a key influence—58% of users said they made purchases after seeing online ads. The most popular product categories include clothing (43%), personal care and beauty (23%), and electronics (22%).
Beyond retail, e-services such as online education, food delivery, transport, healthcare, and government transactions are rapidly transforming daily life. The e-services market is expected to grow 15.7% annually, reaching $1.9 billion and attracting 6.4 million users by 2029. User penetration is forecast to hit 23% of the population by 2025, driven by rising internet access and smartphone usage.
The IPS concludes that digital transformation will be central to Sri Lanka’s economic recovery and modernization. “The continued evolution of e-commerce and e-services will enhance efficiency, improve service delivery, and promote inclusive growth,” the report states.However, economists warn that to sustain this momentum, Sri Lanka must strengthen digital infrastructure, cybersecurity, and policy consistency, ensuring that its fast-growing digital economy remains both inclusive and globally competitive
