Sri Lanka is projecting strong economic growth exceeding 5% in 2025, driven by improved macroeconomic stability, policy reforms, and recovering investor confidence. Despite potential growth projections Sri Lanka’s economic outlook is clouded by significant structural weaknesses. If GDP growth exceeds 3%, the country may not qualify for a debt restructuring, leading to concerns that figures could be manipulated by IMF to reflect higher growth.
Despite optimism, ground realities paint a starkly different picture—SMEs are shutting down, unemployment is rising, consumer demand has weakened, and key economic indicators such as fuel, cement, and electricity usage have declined. Government spending and construction activity remain severely depressed, while a lack of FDI and new projects stifles long-term expansion. Compounding the issue, aggressive tax hikes are limiting private sector investment, and the 8% policy rate amid -4% inflation suggests a deepening economic contraction.
Externally, potential US tariffs on Sri Lankan garment exports could reduce earnings by USD 500 million, while the renewed importation of vehicles may widen the trade deficit by USD 700–900 million.
Furthermore, the potential loss of GSP+ concessions from the EU could significantly impact export competitiveness and weaken the exchange rate. With mounting economic risks, 2025 could be a challenging year requiring urgent policy interventions.
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Sri Lanka: Economic Performance 2024
Economic Review of Sri Lanka for 2024 and prediction for 2025
