Sri Lanka’s economy experienced a notable 5.5% year-on-year (YoY) growth in the third quarter of 2024, marking the highest expansion since 2021. This growth continued the upward trend that began in September 2023 and outpaced the 4.7% growth recorded in the second quarter of the year.
The Department of Census and Statistics (DCS) attributed this positive performance primarily to the industrial sector, which contributed 27.3% to the GDP and grew by an impressive 10.8%.
The service sector, accounting for 55.5% of GDP, expanded by 2.6%, while agriculture, which makes up 8.2% of the GDP, grew by 3%. Additionally, taxes on products (after subsidies), contributing 8.9% to the GDP, increased by 13.3% in Q3 2024.
Several factors played a role in driving this growth. A sharp decline in interest rates toward the end of the third quarter helped ease domestic credit supply, particularly benefiting the private sector. Additionally, a significant increase in exports and imports boosted economic activities, fostering strong forward and backward linkages.
Notably, imports of investment goods and intermediate goods, such as textiles and cement, fueled the growth of key industries like apparel and construction.
Tourism and workers’ remittances also contributed positively to Sri Lanka’s foreign currency reserves, strengthening the value of the rupee in the foreign exchange market.
On the domestic front, improved water levels in reservoirs led to higher hydroelectric power generation, while increased egg and poultry production supported animal agriculture, contributing to the overall growth.
Sectoral Performance
Agriculture
Agriculture recorded a 3% growth in Q3 2024, a slight slowdown from the 4.2% growth in the same period of 2023. Key contributors to this growth included significant expansions in cereal production (46.7%), animal production (19.9%), and tea growing (16.3%). Other areas such as marine fishing, fruit cultivation, and spice growing also saw positive growth. However, some agricultural sectors, including freshwater fishing, rubber cultivation, and forestry, reported contractions.
Industry
The industrial sector as a whole grew by 10.8% in Q3 2024, a sharp turnaround from the 0.7% decline in the same quarter the previous year. The construction and mining sectors showed particularly strong growth, with increases of 23.8% and 25.4%, respectively. Manufacturing expanded by 5.3%, with notable growth in textiles, paper products, wood products, and rubber. However, the manufacturing of coke and refined petroleum products contracted by 52.3%, and the production of non-metallic minerals decreased by 3%.
Services
The service sector collectively grew by 2.6%, recovering from a contraction of 1.7% in Q3 2023. Key growth drivers included the accommodation and food services sector (18.8%), IT programming and consultancy (16%), and the insurance and pension funding sector (8.2%). Other services such as postal services, telecommunications, and real estate also saw positive growth. The only sector to decline was public administration and defense, which contracted by 1.8%.
Overall, Sri Lanka’s economic performance in Q3 2024 reflects strong growth across various sectors, indicating a resilient recovery and promising prospects for the remainder of the year.
