📈 Middle East Crisis Dampens March Export Outlook

Sri Lanka’s export sector faces a projected contraction of 5% to 8% in March 2026, as geopolitical tensions in the Middle East disrupt vital trade routes and logistics. • Overall Impact: The initial monthly growth projection of 10% has moderated to 7.5% in the first two months and is expected to dip further this month. • Regional Exposure: The Middle East accounts for 8% of total exports (US$ 1.08 Bn in 2025). Key markets include the UAE (32%), Iraq (18%), and Saudi Arabia (12%). • Sector Vulnerability: Tea is the most at-risk commodity, representing over 50% of shipments to the Middle East. • Logistics & Costs: Escalating freight and insurance costs, along with transit delays to the US, EU, and UK, are creating knock-on effects across the apparel & textiles and manufacturing networks. • Policy Shift: The EDB is seeking to delay the phased removal of Cess on 2,634 items (originally slated for 2026–2028) to protect local exporters amidst global volatility. • Outlook: Recovery is cautiously expected by May/June 2026. Strategies focus on market diversification and the proposed Sri Lanka-Japan economic corridor to access India and Africa. _Source: EDB Provisional Data_