Monday Apr 20, 2026
Monday Apr 20, 2026
Monday, 20 April 2026 04:58 - - {{hitsCtrl.values.hits}}
The Central Bank of Sri Lanka (CBSL) last week said its latest Business Outlook Survey (BOS), conducted before the onset of the Middle East conflict, pointed to continued expansion in business activity into early 2026 due to favourable macroeconomic conditions.
“The Business Condition Index denoted an expansion in the fourth quarter of 2025 amidst the weather-related disturbances, demonstrating resilience in the overall business environment. Furthermore, the outlook for 1Q 2026 also indicates an expansion,” the CBSL said in its release.
Firms attributed the improvement primarily to relatively low interest rates and subdued inflation, with the services and industry sectors identified as the main drivers of the recovery in sentiment.
The survey, which captures responses from around 100 firms reflecting the composition of Sri Lanka’s GDP, showed that demand and sales volumes improved in 4Q 2025 despite disruptions caused by Cyclone Ditwah. Capacity utilisation and investment also strengthened on a year-on-year (YoY) basis, reflecting underlying demand conditions.
Looking ahead to 1Q 2026, firms across all three major sectors expect further increases in demand and sales volumes on a YoY basis. Profitability and financial conditions are also projected to improve, supported largely by services and industry activities, while capacity utilisation is expected to rise.
The investment outlook remains positive, with firms planning to allocate capital mainly towards capacity expansion and increasing output. At the same time, demand for bank credit is projected to increase across all sectors, primarily to meet operational requirements.
However, labour constraints persist, with the availability of skilled labour expected to remain below neutral levels across all sectors in 1Q 2026. The survey also noted that both skilled and unskilled labour availability contracted in 4Q 2025 compared to a year earlier.
The CBSL said demand for bank credit increased in 4Q 2025 on a YoY basis, although firms reported a marginal easing in access to credit during the quarter.
The BOS, initiated in 2014, is designed to assess current and future business conditions based on structured responses from firms across key sectors.
While the survey points to a steady recovery trajectory, it was conducted prior to the escalation of tensions in the Middle East, which has since disrupted global energy markets and supply chains, introducing new uncertainties to the outlook.
