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Sri Lanka is projected to grow by 4.4% in 2024, with recovery dependent on maintaining macroeconomic stability and continuing reforms.
Sri Lanka is projected to grow by 4.4 percent in 2024 as it recovers from a severe economic crisis, with the recovery hinging on maintaining macroeconomic stability and continuing reforms, according to the World Bank. The country has achieved notable economic stabilization, marked by four consecutive quarters of growth and a current account surplus in 2023. David Sislen, the World Bank Regional Country Director, highlighted the opportunity for Sri Lanka to enhance its participation in global value chains, leveraging its geography and the evolving global landscape to create jobs and sustain growth. The World Bank estimates that Sri Lanka could increase its annual exports by an additional 10 billion US dollars, emphasizing the need to reduce red tape and encourage both local and foreign investments. However, despite tax incentives, there has been a lack of foreign direct investment due to bureaucratic barriers and inward-looking policies, as noted by Country Manager Gevorg Sargsyan.
Sri Lanka faced its worst currency crisis in 2022, resulting in a severe economic contraction, with output shrinking by 7.3 percent in 2022 and 2.3 percent in 2023. The crisis caused poverty levels to rise sharply, with poverty rates increasing from 13.1 percent before the currency collapse to 25.9 percent in 2023. Although poverty is expected to decline to 23.4 percent in 2024 and 21.3 percent in 2025, the country still faces significant challenges. Shruti Lakhthaki noted an increase in Sri Lanka’s infant mortality rate, signaling concerns for the future. Additionally, Sargsyan pointed out the need for more direct taxes and highlighted South Asia's economic potential, hindered by underemployment among women due to cultural factors and high trade taxes, including Sri Lanka's extensive use of import duties and para tariffs.
