Sri Lanka’s economy grew by 4.8% in the first quarter of 2025, reflecting a slowdown in momentum compared to recent quarters, according to the Department of Census and Statistics (DCS). This marks the second-lowest quarterly growth in the past year and is a drop from the 5.3% expansion seen in the same period last year.
Despite the dip, the economy continued its recovery trajectory, registering its seventh consecutive quarter of positive growth since the third quarter of 2023. Sri Lanka’s economy rebounded strongly in 2024, posting a full-year growth of 5.5%, a sharp turnaround from the 2.3% contraction in 2023.
In Q1 2025, agriculture contracted by 0.7%, dragging down overall performance, while industrial and services sectors grew by 9.7% and 2.8% respectively. Taxes minus subsidies on products rose by 8.3%.
Industrial activity played a leading role in the quarter’s growth, driven by the manufacturing, construction, mining, and quarrying sectors. Manufacturing alone grew by 9.6%, while the construction sector expanded by 10.7%, and mining and quarrying surged by 12.6%. This was supported by a stable exchange rate, lower interest rates, and increased imports of investment and intermediate goods.
However, agriculture weighed down the overall figures. Although sub-sectors like animal production (18.8%), marine fishing (14.5%), and tea cultivation (5.6%) saw notable gains, the sector declined due to sharp contractions in fresh water fishing (-57.0%), oleaginous fruit cultivation (-27.6%), and rubber production (-22.2%). Other key crop categories such as rice (-0.8%) and cereals (-0.4%) also posted declines.
Within industry, most sub-sectors showed growth. Notably, electricity, gas, steam, and air conditioning supply increased by 3.4%, while sewerage and waste management grew by 7.9%. However, water supply fell by 3.2%. In contrast, two manufacturing categories—repair and installation of machinery (-10.6%) and refined petroleum products—saw no or negative growth.
The services sector posted a 2.8% increase, slightly higher than the 2.5% reported a year ago. Key contributors included financial services and accommodation-related activities, reinforcing the gradual economic rebound.
While the slower growth in Q1 signals a tempering of the recent recovery pace, consistent quarterly expansion and strong performance in industrial sectors highlight the economy’s underlying resilience.
