📊 Sri Lanka's Q1 2026 GDP Grows 5.1% Amid Widening Trade Deficit

• Overall Growth & Money Supply Real GDP expanded 5.1% YoY in Q1 2026, supported by services (+2.0 pp) and industry (+2.6 pp), while agriculture contributed 0.1 pp. Consumption drove expansion, with transactional M1 money supply rising 5.5% and currency in circulation up 10.4%. • Trade Mismatch & Imports Import growth (+18.1%) outpaced export growth (+3.4%), widening the trade deficit from US$ 1.54 Bn to US$ 2.31 Bn. • Merchandise Exports: US$ 3.46 Bn (+3.4% YoY) • Merchandise Imports: US$ 5.77 Bn (+18.1% YoY) • Fuel & energy imports surged 102.9% YoY to US$ 939 Mn. • Personal vehicle imports jumped 80.4% YoY to US$ 311 Mn. • Combined, fuel and vehicles consumed 36% of total export revenue. • External Inflows & Buffers • Workers' remittances grew 27.7% YoY to US$ 2.26 Bn, acting as the primary buffer for the current account. • Foreign Direct Investment (FDI) remained subdued at US$ 184 Mn in Q1 2026 (~12x lower than remittances). • Gross official reserves stood at US$ 6.8–6.9 Bn, with inflation at 5.4% (April 2026). Total IMF disbursements reached US$ 2.4 Bn following May 2026 reviews. • Key Vulnerability Every US$ 10/bbl increase in oil prices adds US$ 120–150 Mn per quarter to the import bill. To curb consumer import credit, CBSL raised the policy rate by 100 bps to 8.75% in May 2026.