Tuesday, April 16, 2024

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World Bank predicts moderate growth of 2.2% for Sri Lanka in 2024.

By: Staff Writer

April 03, Colombo (LNW): The World Bank yesterday said Sri Lanka’s economy is projected to see moderate growth of 2.2% in 2024, showing signs of stabilisation, following the severe economic downturn but the country still faces elevated poverty levels, income inequality, and labour market concerns.

The fresh assessment of the multilateral donor agency is contained in its latest bi-annual update.

Released yesterday the Sri Lanka Development Update, Bridge to Recovery, 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.

Labour 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,” according to the report.

“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,” emphasised World Bank Country Director for Maldives, Nepal and Sri Lanka Faris Hadad-Zervos.

“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.”

Looking forward, the report projects a modest pickup in growth of 2.5% in 2025, with a gradual increase in inflation and a small current account surplus.

However, high debt service obligations are expected to exert pressure on fiscal balances. Poverty rates are anticipated to remain above 22% until 2026.

Risks to the outlook remain, particularly related to inadequate debt restructuring, reversal of reforms, financial sector vulnerabilities, and the enduring impact of the crisis.

The report emphasises that strong reform implementation will be fundamental to fostering a resilient economy through continued macro-fiscal-financial stability, greater private sector investment, and addressing risks associated with state-owned enterprises.

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