📈 Sri Lanka Economy Reaches Pre-Crisis Levels, but Recovery Uneven: World Bank

The World Bank’s latest Sri Lanka Development Update projects GDP growth at 4.4% for 2026, driven by strong performance in industry and services, before slowing to 4.2% in 2027. • Overall Growth & Milestones • Real GDP grew 4.7% YoY in H1 2026, returning output to 2018 pre-crisis levels after 12 consecutive quarters of expansion. • Primary budget surplus rose sharply; country reclassified as an upper-middle-income nation. • Downside risks include global energy price volatility and potential El Niño impacts. • Labor Market & Poverty Challenges • Economic rebound remains incomplete as household incomes and labor market outcomes lag behind. • Poverty levels remain elevated at 16.9% alongside a recent uptick in inflation from rising food and energy costs. • Agrifood & Export Sector Potential • Primary agriculture represents ~8% of GDP, but the broader agrifood sector generates 1/6th of total GDP and >40% of employment. • Agribusiness accounts for nearly 30% of goods exports, with key contributions from tea, coconut, cinnamon, seafood, and rubber. • Targeted trade, land, and cold-chain logistics reforms could unlock further private investment for smallholders.