SL Economic Outlook: Resilient Recovery Faces External Risks 📈

Sri Lanka’s economy is projected to grow by 4.0% in 2026 and 4.2% in 2027, following a robust 5.0% growth recorded in 2025, according to the latest ADB report. • Growth Drivers & Performance: The recovery remained firm in 2025 despite Cyclone Ditwah. Key contributors included surging private consumption, record-high remittances, and a strong primary budget surplus. Official reserves have reached their strongest levels in years. • Macroeconomic Indicators: • GDP Growth: 4.0% (2026 forecast) vs 5.0% (2025). • Inflation: Projected to accelerate to 5.2% in 2026 due to rising energy costs. • Current Account: Maintained a surplus for the third consecutive year. • Sectoral Impacts & Risks: • Energy & Trade: Middle East tensions pose significant risks, potentially hiking energy costs and disrupting trade and tourism. • Investment: Private investment recovery is expected to be gradual due to global uncertainty. • Construction: Post-cyclone reconstruction spending is expected to provide some support to the construction sector and overall GDP. • Policy Outlook: The ADB emphasizes that fiscal discipline and structural reforms must continue. Strengthening resilience against external shocks and scaling up public investment are deemed essential to sustaining the current recovery momentum.