World Bank projects 4.4% growth for Sri Lanka in 2024, highlights $10 billion export potential

Sri Lanka’s economy has stabilized, with growth expected to reach 4.4% in 2024, surpassing earlier forecasts.

This positive outlook comes after four consecutive quarters of growth, mainly driven by the industrial and tourism sectors, along with key structural and policy reforms, according to the World Bank.

In its bi-annual Sri Lanka Development Update, titled Opening Up to the Future, released today, the World Bank warns that while recovery is ongoing, it remains fragile.

The country’s continued progress depends on maintaining macroeconomic stability, successfully restructuring debt, and pursuing further reforms to boost medium-term growth and reduce poverty.

Key reforms include increasing exports, attracting foreign investment, improving female labor force participation, enhancing productivity, and tackling challenges such as poverty, food insecurity, and vulnerabilities in the financial sector.

These reforms are essential for achieving more inclusive and sustainable growth.

The report highlights Sri Lanka’s potential to achieve higher, sustainable growth through trade. The country has an untapped export potential estimated at $10 billion annually, which could create around 142,500 new jobs.

Opportunities exist for diversifying and expanding exports in manufacturing, services, and agriculture, but these will only materialize if necessary reforms are implemented.

“Sri Lanka’s recent economic stabilization, marked by four quarters of growth and a current account surplus in 2023, is a significant milestone,” said David Sislen, World Bank Regional Country Director for Maldives, Nepal, and Sri Lanka.

“At this moment, Sri Lanka has a real opportunity to realize its export potential, which we estimate at $10 billion annually. There is an opening for Sri Lanka to deepen its participation in global value chains and take advantage of its geography and an evolving global landscape to generate jobs and sustain growth. The continued implementation of important economic and governance-related reforms will allow Sri Lanka to fully benefit from this moment.”

Looking ahead, the report predicts modest growth of 3.5% in 2025, with a moderate pace of growth in the medium term due to the lingering effects of the economic crisis.

Although poverty is expected to gradually decline, it will likely remain above 20% until 2026. Inflation is projected to stay below the central bank’s 5% target in 2024 but may rise as demand increases.

The current account is expected to remain in surplus in 2024, driven by tourism and remittances.

The Sri Lanka Development Update is a companion report to the South Asia Development Update, a twice-yearly World Bank report on economic developments and policy challenges in South Asia.

The October 2024 edition, Women, Jobs, and Growth, projects that South Asia will grow by 6.4% this year, making it the fastest-growing emerging market and developing economy (EMDE) region in the world.

The World Bank’s regional outlook suggests that increasing women’s labor force participation and further opening the region to global trade and investment could help accelerate growth and achieve its development goals.