October 11, Colombo (LNW): Sri Lanka’s economy has stabilised, with growth projected to reach 4.4% in 2024, surpassing earlier forecasts, according to the World Bank’s bi-annual Sri Lanka Development Update report, titled Opening Up to the Future, released yesterday.
This optimistic outlook follows four consecutive quarters of economic growth, primarily driven by the industrial and tourism sectors, and supported by critical structural and policy reforms, the report highlighted. However, it cautioned that the recovery remains fragile, hinging on maintaining macroeconomic stability, successful debt restructuring, and continuing reforms to enhance medium-term growth and reduce poverty.
Key reforms aimed at boosting exports, attracting foreign investment, increasing female labour force participation, and improving productivity are essential for fostering more inclusive and sustainable growth. Addressing challenges such as poverty, food insecurity, and financial sector vulnerabilities are also critical.
The report emphasised Sri Lanka’s potential for higher, sustained growth through trade, with an estimated untapped export potential of US$10 billion annually. This expansion could generate around 142,500 new jobs, particularly in manufacturing, services, and agriculture, provided necessary reforms are undertaken.
“Sri Lanka’s recent economic stabilisation, marked by four quarters of growth and a current account surplus in 2023, is a significant milestone,” said David Sislen, World Bank Regional Country Director for Maldives, Nepal, and Sri Lanka. He added that the country now has a real opportunity to realise its export potential and deepen its integration into global value chains, fostering jobs and long-term growth.
Looking ahead, the report projects a modest 3.5% growth in 2025, followed by a more gradual path in the medium term due to lingering effects of the economic crisis. Poverty is expected to decline slowly but remain above 20% until 2026.
Inflation is likely to stay below the Central Bank’s target of 5% in 2024, with a gradual increase as demand picks up. The current account is expected to remain in surplus, driven by tourism and remittances.
The report is a companion piece to the South Asia Development Update, which projects the region’s growth at 6.4% for 2024, making it the fastest-growing emerging market and developing economy (EMDE) region in the world. Increasing women’s participation in the labour force and enhancing trade and investment are seen as key drivers for even faster growth and achieving the region’s development goals.
