Sri Lanka showing signs of recovery, with green shoots emerging in 2023

“Sri Lanka has made commendable progress in implementing difficult policy reforms and stabilizing the economy in 2023,” said ADB Deputy Country Director for Sri Lanka Utsav Kumar.

The Asian Development Bank’s (ADB) annual flagship economic publication, the Asian Development Outlook (ADO) April 2024, forecasts Sri Lanka’s economy to record moderate growth of 1.9% in 2024 and 2.5% in 2025 following 2 consecutive years of contractions.

Sri Lanka is showing signs of recovery, with green shoots emerging in the second half of 2023. Inflation has decelerated to single digits, foreign exchange reserves continue to be built up, and the exchange rate has appreciated. Tourist arrivals and remittance inflows continue to show a commendable recovery while supply conditions have improved. ADB’s growth forecast hinges on the continuation of reforms and better consumer and business sentiment. Timely completion of external debt restructuring will also support Sri Lanka’s debt sustainability efforts.

“Sri Lanka has made commendable progress in implementing difficult policy reforms and stabilizing the economy in 2023,” said ADB Deputy Country Director for Sri Lanka Utsav Kumar. “We are pleased to see the results of these reforms, with signs of recovery emerging. It is critical that Sri Lanka addresses the impact on the poor and vulnerable and also continues to implement reforms to address the underlying causes of the crisis and lay the foundation for fostering sustainable recovery, building resilience, and reviving growth.”

Addressing poverty vulnerabilities amid economic recovery is a major challenge faced by the country. Poverty gains eroded as a result of the COVID-19 pandemic and the subsequent economic crisis. As the economy stabilizes, the country must ensure that the most affected and vulnerable groups of people are supported, and high poverty incidence and income inequality are addressed. This calls for appropriate institutional and structural frameworks for an inclusive social protection system with improved targeting. Creating jobs and fostering sustainable livelihoods would go a long way toward alleviating poverty.