Sri Lanka's Economy Recovers, But Poverty Remains A Risk : World Bank

COLOMBO (News 1st); The World Bank says that Sri Lanka's economy has made a remarkable recovery in 2024, recording a growth rate of 5 percent, surpassing the WB's projected 4.4 percent.

In a statememt on Wednesday (23), the World Bank said that this growth has been driven by strong performances in industry and services, particularly in construction and tourism-related services.

However, the World Bank forecasts that growth will moderate to 3.5 percent in 2025 due to the lingering effects of the crisis and structural impediments to growth, amid global headwinds and unprecedented trade policy uncertainty.

The World Bank's bi-annual Sri Lanka Development Update, titled "Staying on Track," was released today (23).

Despite the positive growth and fiscal performance, the report highlights significant challenges that remain.

While the economy is recovering, many Sri Lankans are still struggling, reported the World Bank adding that household incomes, employment, and overall welfare are still well below pre-crisis levels, and the poverty rate remained alarmingly high at 24.5 percent in 2024.

It went on to note that the country's labor market continues to struggle, leading to increased emigration as people look for opportunities abroad.

"While Sri Lanka's economy is bouncing back stronger than expected, a significant portion of the population—about a third—remains in poverty or is at risk of falling back into poverty," said David Sislen, World Bank Division Director for Maldives, Nepal, and Sri Lanka. "To ensure this recovery works for everyone, especially those who have been hit hardest, Sri Lanka can focus on policies that create jobs and support the poor."

The report underscores that medium-term growth and poverty reduction depend on maintaining macroeconomic stability and implementing key structural reforms amid an increasingly uncertain global environment.

The World Bank forecasts moderate growth of around 3.1 percent for Sri Lanka in 2026.

Shifting to a higher growth trajectory through the successful implementation of reforms that enhance trade, investment, competition, and female labor force participation, among others, is essential to ensure that all Sri Lankans benefit from the recovery, said the World Bank in a statement

The World Bank calls for the continued need for policy reforms to maintain macro-fiscal and financial stability, boost competitiveness, increase productivity, and expand job opportunities.