Economy inches up in 2Q since losing momentum for two quarters

• GDP grew 4.9% in 2Q 2025, ending a declining trend seen in previous two quarters 
• Agricultural activities expand 2%, Industrial and Services activities grow 5.8% and 3.9%, respectively; taxes less subsidies on products grows by 13.5%
• 2Q 2025 marks positive growth rate for consecutive eighth quarter starting from 3Q 2023

Sri Lanka’s economy in the second quarter of 2025 has inched upwards after losing momentum in the previous two quarters. 

The Department of Census and Statistics (DCS) yesterday confirmed that the country’s Gross Domestic Product (GDP) grew by 4.9% in 2Q 2025, slightly up in comparison to 4.7% achieved a year ago. 

The economy declined since peaking at 5.5% in 3Q 2024 to 5.4% in 4Q 2024, and 4.8% in 1Q 2025.

However, the encouraging development is that 2Q 2025 marked a positive growth rate for the consecutive eighth quarter, starting from 3Q 2023. In the full year of 2024, the economy achieved a complete turnaround, posting 5.5% growth as against a contraction of 2.3% in 2023.

Issuing a communiqué on releasing National Accounts Estimates, the DCS said Agricultural, Industrial, and Services activities reported increases of 2%, 5.8%, and 3.9%, respectively.

It has been noticed that lifting vehicle import restrictions coincide with relatively lower interest rates enriched the economy to perform as expected through major economic activities like wholesale and retail trade including repair of motor vehicles, goods and passenger transport including warehousing activities, financial services activities, insurance activities, as well as taxes less subsidies on products. 

Taxes less subsidies on products grew by 13.5% and this impressive growth in taxes was anchored by the increase in taxes with relate to the increased vehicle inflows.

Furthermore, the usual growth stimulators in Sri Lanka economy, like construction and mining and quarrying also reported interesting expansions in the second quarter of 2025. In the meantime, manufacturing activities reported a moderate expansion during this quarter. 

DCS gave the following commentary on sectoral performance.

In the second quarter of year 2025, agriculture activities reported a 2% expansion compared to the 2.7% expansion which was reported in the same quarter in a year ago.

After a period of subdued performance, most of the agriculture activities reported expansions during the second quarter of 2025. Consequently, ‘Animal production’ (13.9%), ‘Growing of cereals’ (12.4%), ‘Plant propagation’ (9.5%), ‘Forestry and logging’ (9.5%), ‘Growing of tea’ (6%), ‘Agriculture supporting activities’ (5.9%), ‘Growing of rice’ (5%), ‘Growing of sugar cane, tobacco and non-perennial crops’ (4.3%), ‘Growing of oleaginous fruits including coconut’ (3.8%), ‘Growing of coffee, cocoa and other beverages crops’ (2.4%), ‘Growing of fruits’ (1.9%), ‘Growing of spices, aromatic, drug and pharmaceutical crops’ (1.2%), ‘Growing of other perennial crops’ ( 0.4%) reported positive growth rates. 

Despite this expansion in majority of agriculture activities, ‘Fresh water fishing and fresh water aquaculture’ (34.8%), ‘Growing of rubber’ (10.8%), ‘Marine fishing’ (5.2%) and ‘Growing of vegetables’ (3.6%) reported contractions in the second quarter of 2025.

Industrial activities reported a 5.8% growth in the second quarter of 2025 compared to the reported 9.7% growth in the second quarter in the previous year.

In the ‘Industrial activities’, ‘Construction industry’ and ‘Mining and quarrying industry’ grew by 8.5% and 16.6% respectively by stimulating overall growth. More importantly, manufacturing industry grew by 3.7% during the second quarter of 2025.

Among the manufacturing activities, ‘Manufacture of coke and refined petroleum products’ (21.7%), ‘Manufacture of other non-metallic mineral products’ (17.1%), ‘Manufacture of basic metal and fabricated metal products’ (9.7%), ‘Manufacture of textiles, wearing apparel, leather and other related products’ (9.6%), ‘Manufacture of machinery and equipment’ (5.8%) , ‘Manufacture of rubber and plastic products’ (5%), ‘Manufacture of food, beverages and tobacco products’ (1.5%) reported expansions. To dilute the above expansions in manufacturing, ‘Manufacture of wood and wood products’ (9.4%), ‘Manufacture of chemical products and basic pharmaceutical products’ (5.5%), ‘Other manufacturing and repair and installation of machinery and equipment’ (4.4%), ‘Manufacture of paper and paper products’ (0.8%), and ‘Manufacture of furniture’ (0.2%) reported declines.

Besides manufacturing activities, ‘Electricity, gas, steam and air conditioning supply’ (5.3%), ‘Water collection, treatment and supply’ (5.8%), and ‘Sewerage, waste, treatment and disposal activities’ (7%) all reported increases in the second quarter of 2025.

Services activities reported a striking 3.9% growth in the second quarter of 2025 compared to the reported 1.9% growth in the second quarter in the previous year.

Apart from the reported 2.1% decline in the ‘Public administration and defence’ sub activity, all other services sub activities reported positive expansions. Thus, the reported growth in the services activities was collectively supported by the ‘IT programing consultancy and related activities’ (18.7%), ‘Financial service activities’(12.3%), ‘Postal and courier services’ (11.6%), ‘Accommodation, food and beverage serving activities’ (10.3%), ‘Insurance, reinsurance and pension funding’ (10.1%), ‘Transportation of goods and passengers including warehousing’ (4.8%), ‘Human health services’ (3.9%), ‘Professional services’ (3.9%), ‘Real estate activities and ownership of dwelling’ (3.4%), ‘Telecommunication’ (3.3%), ‘Wholesale and retail trade’ (1.8%), ‘Programing and broadcasting activities’ (1.5%), ‘Other personal services’ (1.2%), and ‘Education’ (1.2%) respectively.