Growth in Sri Lanka is expected to decelerate to 3.5 per cent in 2026 and 3.1 per cent in 2027, according to the World Bank’s Global Economic Outlook 2026.
The report cites reflecting structural impediments to growth, including factor and product market inefficiencies, the scarring effects of the economic crisis, and global economic uncertainty, hurting demand for exports.
The report further states that current account deficits in the region are projected to remain moderate, but in contrast, Sri Lanka is forecast to run current account surpluses, primarily reflecting lower global oil prices and resilient remittance inflows, particularly from member countries of the Gulf Cooperation Council, where activity is anticipated to remain robust.
Poverty is expected to decline in the region over the forecast horizon, supported by steady per capita income growth amid slowing population growth, moderate inflationary pressures, and solid remittance inflows.
In several economies, including Sri Lanka, emigration pressures are projected to remain heightened, especially among the young and highly skilled population.
Risks to the regional outlook are tilted to the downside, the report states, pointing out that a further rise in tariffs or other trade restrictions, or heightened uncertainty about global trade policies, could dampen export demand and economic activity in the region.
Although openness to global trade is relatively limited in the region’s economies, the risk is higher in those with larger exposure to the United States, including Bangladesh and Sri Lanka, than in other regional economies.
Increases in tariffs, including through the removal of exemptions relating, for example, to electronics, or extensions to services, could directly weaken growth, it added.
Full report: https://documents1.worldbank.org/curated/en/099710001132613726/pdf/IDU-56669726-de15-4ce7-9acc-19c4c9dbd25e.pdf (Newswire)