• Sri Lanka's economy outperformed expectations in the first quarter, but the outlook remains uncertain due to upcoming elections, with revised inflation forecasts indicating improvements from better supply-side conditions and external buffers.

Sri Lanka's economy performed better than expected in the first quarter of the year, but the Asian Development Bank (ADB) warns of uncertainties ahead, especially with the upcoming election cycle. Policy reforms and continuity are highlighted as key concerns by economists and analysts. Despite these challenges, Sri Lanka's inflation forecast for 2024 has been revised down due to improved supply-side conditions and better external buffers. The Central Bank of Sri Lanka expects headline inflation to fall below the targeted 5 percent in the coming months, although it may stabilize around this level over the medium term with appropriate policies.

In the broader South Asian region, the ADB's growth forecast for 2024 remains unchanged at 6.3 percent, as downward revisions for GDP growth in Bangladesh and Maldives are balanced by upward revisions for Bhutan, Nepal, and Pakistan. Inflation forecasts for the region are adjusted to 7.1 percent for 2024, with higher projections for Bangladesh and Maldives. Inflation expectations for Bhutan, India, and Pakistan remain consistent with earlier forecasts.

SL economy outperforms in 1Q, but uncertainty looms due to elections: ADB | Daily Mirror