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World Bank raises Sri Lanka's growth forecast to 2.2% for 2024

The World Bank has revised its forecast for Sri Lanka's economy, now projecting a growth of 2.2% for 2024, a significant improvement from the nation's worst financial crisis in decades. With a $2.9 billion IMF bailout in 2023, Sri Lanka has stabilized its economy, leading to a predicted return to growth after a 2.3% contraction in 2023. The latest report on South Asia indicates a further strengthening with a forecasted 2.5% real GDP growth in 2025, driven by recoveries in reserves, remittances, and tourism. However, the recovery is expected to be moderate rather than a quick bounce back, according to the World Bank.

Despite improvements, challenges persist, with Sri Lanka still grappling with a high poverty rate projected to remain above 22% until 2026, mainly due to factors like high inflation, loss of purchasing power, and declines in wages and employment. The nation has secured agreements for debt restructuring with China, India, and the Paris Club nations, but bilateral agreements with each creditor are necessary to fulfill IMF bailout conditions, crucially before the upcoming presidential elections in the second half of 2024.

Richard Walker, a senior economist at the World Bank, highlights significant downside risks, including limited reserves and policy fatigue. Additionally, a thorough debt restructuring process is deemed essential for sustained economic stability. In South Asia, excluding Afghanistan, robust growth is anticipated, with India leading at 6.6% for fiscal year 2025. However, Pakistan's growth projections for fiscal years 2024 and 2025 fall slightly below expectations, indicating ongoing economic challenges in the region.

World Bank raises Sri Lanka's growth forecast to 2.2% for 2024 | Reuters