World Bank: Sri Lanka Growth to Moderate to 3.6% in 2026 📈

The World Bank's April 2026 Update projects Sri Lanka’s economy will regain its 2018 pre-crisis size despite a slowdown from the 5% growth recorded in 2025. • Overall Growth & Inflation • GDP growth projected at 3.6% (2026) and 3.8% (2027). • Inflation expected to exceed the 5% target in 2026 due to energy shocks. • Debt-to-GDP improved to 93% by Q3 2025 (down from 120%+). • Sector Performance & Drivers • Consumption & Investment: Primary growth drivers, supported by reconstruction following Cyclone Ditwah (US$ 3.3 Bn in damages). • Tourism: Growth remains strong but contingent on stability in the Middle East. • Remittances: Rose 20%+ in 2025; however, Middle East disruptions pose a risk to these inflows (approx. 3% of GDP). • Key Risks & Challenges • Energy: Rising oil prices (base case US$ 90/bbl) threaten current account deficits. • Labor: Persistent shortages of skilled workers due to outward migration. • Fiscal: High interest payments and SOE mismanagement (500+ entities) limit policy space.