By: Staff Writer
March 18, Colombo (LNW): Sri Lanka’s economy is showing signs of recovery, with the manufacturing and service sectors witnessing a resurgence. The manufacturing industry, which has faced challenges due to economic instability and supply chain disruptions, is experiencing an uptick in production and new orders. Similarly, the service sector, a significant contributor to the economy, is expanding steadily. This revival is largely driven by increased consumer demand, particularly in anticipation of the festive season.
However, the introduction of new taxation policies has created both opportunities and challenges for businesses. While the increased tax revenue is aimed at stabilizing the economy and reducing fiscal deficits, higher tax burdens on companies could impact profitability and operational efficiency. Manufacturers and service providers must navigate these changes strategically to maintain growth momentum.
Sri Lanka’s business activities in the manufacturing and services sectors continued to expand in February, supported by rising demand ahead of the festive season, according to the latest Purchasing Managers’ Index (PMI) compiled by the Central Bank.
The PMI for manufacturing registered 56.8 in February, down from 59.0 in January but still indicating steady growth. The food and beverage manufacturing sector, in particular, is ramping up production to meet increased demand, driving expansions in new orders (60.5) and production sub-indices (53.0), according to the Central Bank.
Employment levels (57.0) and stock of purchases (55.0) also saw growth, reflecting proactive adjustments to accommodate rising demand. However, suppliers faced increased pressure, leading to longer delivery times, with the suppliers’ delivery time index reaching 56.6 in February.
The outlook for manufacturing remains optimistic, with expectations of continued growth over the next three months, primarily due to festive season demand.
Similarly, the services sector demonstrated a slower but steady expansion, with the Sri Lanka Purchasing Managers’ Index for Services recording an index value of 56.5 in February 2025. Growth was observed across various sub-sectors, driven by rising consumer activity and improved business sentiment.
Financial services experienced a notable boost, supported by increased lending activities. Other segments, including wholesale and retail trade, education, real estate, professional services, accommodation, food and beverage, insurance, and other personal services, also saw positive momentum.
New business activities grew at 58.5 in February, albeit at a slightly slower pace compared to January (59.0). This expansion was largely fueled by growth in financial services, accommodation, and education, real estate, and transportation sectors.
Employment levels continued to rise, with the employment index recording 59.6, as businesses expanded their workforce in preparation for the festive period. Meanwhile, backlogs of work declined at a faster rate, registering 45.6.
Business expectations for the coming months remain highly optimistic, with the index for anticipated business activities rising to 81.3. This reflects strong confidence among businesses, supported by seasonal demand and improving economic conditions.
