📈 Beyond Stabilization: The Push for 7-8% Growth

The Central Bank of Sri Lanka (CBSL) projects a 4-5% GDP growth for 2026, signaling economic stabilization. However, experts argue this "moderate recovery" may not be enough to ensure long-term prosperity without a deeper structural shift toward export and productivity breakthroughs. • Overall Outlook: Current growth is driven by post-cyclone reconstruction and consumption-led expansion. While this lifts GDP in the short term, it risks normalizing mediocrity and recreating external vulnerabilities due to high import demand for materials like cement and fuel. • Growth Targets: - Projected: 4-5% (Stabilization-led) - Required: 7-8% (Transformation-led) Sustainable growth requires shifting from "macro control" (inflation targets, reserves) to a strategy focused on what the country produces and exports. • Key Sector Risks: - Construction: Expected boost from public investment but lacks long-term productive capacity. - Manufacturing & Tradables: Need for industrial upgrading and technological learning to close income gaps. - External Sector: Widening trade deficits remain a threat if export capacity does not expand in parallel with domestic stimulus. • Strategic Gaps: Stabilization is the foundation, not the strategy. True "structural transformation" involves moving resources into higher-value ICT/BPM, apparel & textiles, and diversified exports to break the cycle of external debt and "stop-go" growth. _Summary based on current economic analysis and CBSL projections._