Sri Lanka’s economy rebounds strongly, but poverty remains a major concern – World Bank

Sri Lanka’s economy grew faster than expected in 2024, according to a new World Bank report released today (April 23).

The country recorded a 5% growth rate, beating the earlier forecast of 4.4%. This rebound was driven by strong performances in industry and services, especially in construction and tourism-related sectors.

However, the World Bank warns that growth will slow down in 2025 to 3.5%. The slowdown is due to lasting impacts of the recent economic crisis, structural problems, and global uncertainties, including unpredictable trade policies.

The latest Sri Lanka Development Update, titled “Staying on Track”, highlights that despite the positive economic performance, many Sri Lankans continue to struggle. Household incomes and employment have not returned to pre-crisis levels, and poverty remains high, affecting 24.5% of the population in 2024.

Many people are leaving the country in search of better job opportunities abroad due to ongoing challenges in the labor market.

“While Sri Lanka’s economy is bouncing back stronger than expected, a significant portion of the population about a third remains in poverty or is at risk of falling back into poverty,” said David Sislen, World Bank Division Director for Maldives, Nepal, and Sri Lanka. “To ensure this recovery works for everyone, especially those who have been hit hardest, Sri Lanka can focus on policies that create jobs and support the poor.”

The report stresses that Sri Lanka’s long-term growth and efforts to reduce poverty depend on keeping the economy stable and pushing forward key reforms. These include improving trade and investment, boosting competition, increasing female participation in the workforce, and expanding job opportunities. The World Bank projects further moderate growth of 3.1% in 2026.

This Sri Lanka-focused report is part of the broader South Asia Development Update, released twice a year by the World Bank. The April 2025 edition, titled “Taxing Times”, shows that regional growth is expected to slow to 5.8% in 2025 before rising slightly to 6.1% in 2026. The report warns that both global risks and domestic challenges like limited government budgets pose serious threats to economic progress.

A special chapter in the regional report focuses on how South Asian countries can improve their tax systems. Even though tax rates are often high, revenues collected are still lower than in other emerging markets. Fixing these inefficiencies is crucial for increasing resilience in an uncertain global economy.

Overall, while Sri Lanka’s economy is showing strong signs of recovery, the World Bank stresses that inclusive growth and continued reforms are vital to make sure the benefits reach all parts of society.

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