Sri Lanka’s economy to expand by 2.2% in 2024 – World Bank

Sri Lanka’s economy is expected to expand by 2.2 percent in 2024, according to the World Bank’s latest Global Economic Prospects report issued on Friday (14).

The report indicates that this is a 0.5-percentage-point upward revision from January—supported by modest recoveries in remittances and tourism. 

Meanwhile, it highlights that in 2025-2026, growth is projected to strengthen further, reaching 3% in 2026, assuming successful debt restructuring negotiations and the implementation of structural reforms, which would offset the adverse impact of planned fiscal consolidation on growth.

In its latest Global Economic Prospects report, the World Bank says that in the South Asian Region (SAR), economic spillovers from outside the region tend to be limited, because the region is generally less open to international trade than other parts of the world. However, weaker-than projected growth in major trading partners could damage growth in several countries, particularly Bangladesh, Pakistan, and Sri Lanka, it added.

“For example, China accounts for a high share of imports of intermediate goods in these countries, and softerthan-projected activity in China could cause a decline in receipt of intermediate goods, which would result in shortages in input materials and dampen activity. In addition, countries in Europe are the main export destination for these countries, and weaker-than expected demand in Europe, particularly the euro area, could cause a slowdown in export activity.”

“An upside risk to regional growth is stronger-than projected activity in the United States. This could stimulate faster growth, especially in countries that are large exporters to the United States—including Pakistan and Sri Lanka. Another upside risk is greater progress in lowering global inflation, which could lead to faster-than-expected easing of monetary policy, reducing borrowing costs and improving the growth outlook”, the report highlighted.

Additionally, the World Bank states in its report that the growth in South Asian Region is estimated to have increased to 6.6 percent in 2023, largely driven by faster growth in India. In early 2024, strong activity continued in India. 

While private sector activity picked up in several countries, including Pakistan and Sri Lanka, it remained weak, it added.

In Sri Lanka, after contracting in 2023, activity has strengthened and tourism and remittances have also recovered, though they have remained below pre-pandemic levels, as per the World Bank report.

Moreover, the World Bank indicates that foreign exchange reserves have increased in several countries, including Pakistan and Sri Lanka, reflecting the easing of currency pressures and receipts of official flows, but reserve levels in some countries remain low.

“In SAR, economic spillovers from outside the region tend to be limited, because the region is generally less open to international trade than other parts of the world. However, weaker-thanprojected growth in major trading partners could damage growth in several countries, particularly Bangladesh, Pakistan, and Sri Lanka”, the report mentioned.

Additionally, an upside risk to regional growth is stronger-thanprojected activity in the United States, the World Bank said, adding that this could stimulate faster growth, especially in countries that are large exporters to the United States—including Pakistan and Sri Lanka. 

“Another upside risk is greater progress in lowering global inflation, which could lead to faster-than-expected easing of monetary policy, reducing borrowing costs and improving the growth outlook”, it added.