Tuesday Jan 20, 2026
Tuesday Jan 20, 2026
Tuesday, 20 January 2026 02:51 - - {{hitsCtrl.values.hits}}
Sri Lanka is expected to sustain both primary fiscal surpluses and current account surpluses over the medium term, supported by strong revenue performance, lower global oil prices, and resilient remittance inflows even as economic growth moderates, according to the World Bank’s Global Economic Outlook 2026.
The World Bank said growth in Sri Lanka is projected to decelerate to 3.5% in 2026 and 3.1% in 2027, reflecting structural impediments to growth, including factor and product market inefficiencies, the scarring effects of the economic crisis, and global economic uncertainty hurting demand for exports.
Despite the slowdown, the forecast is marginally higher than the Bank’s June 2025 outlook, pointing to improved macroeconomic stabilisation, with the 2025 and 2026 projections revised up by 1.1 percentage points and 0.4 percentage points, respectively. However, the growth projections do not factor in the impacts of Ditwah, with assessments ongoing.
The initial damage estimated by the World Bank Group was at $ 4.1 billion, or 4% of the country’s GDP in 2025.
On the fiscal front, the report said strong revenue performance in Sri Lanka is forecast to lead to reductions in fiscal deficits and public debt, reinforcing expectations that the Government will continue to run primary surpluses as part of its consolidation effort.
Externally, Sri Lanka is forecast to record current account surpluses, primarily reflecting lower global oil prices and resilient remittance inflows, particularly from member countries of the Gulf Cooperation Council, where activity is anticipated to remain robust, the World Bank said, providing a cushion against external financing pressures.
However, the outlook remains constrained by structural and demographic challenges. The Bank warned that emigration pressures are projected to remain heightened, especially among the young and highly skilled population, posing risks to medium-term growth potential and productivity.
The report also flagged global trade risks, noting that a further rise in tariffs or other trade restrictions, or heightened uncertainty about global trade policies, could dampen export demand and economic activity in the region. While South Asia’s overall trade openness is limited, the World Bank said the risk is higher for economies with greater exposure to the US, including Sri Lanka, where tariff increases or the removal of exemptions could directly weaken growth.
