WB: Economy back, but households still hurt

Sri Lanka’s economy has reached pre-crisis levels, according to the latest World Bank Group economic outlook. While the recovery is on track, household incomes and labor market outcomes are still behind the broader economic rebound. The World Bank's "From Recovery to Transformation" report projects Sri Lanka's GDP to grow by 4.4% this year, surpassing earlier estimates.

This growth is attributed to strong industry performance and steady service sector expansion. However, growth is expected to decelerate to 4.2% in 2027 as the post-crisis rebound wanes and productivity lags. Heightened risks, such as global energy market volatility and El Niño, could impact productivity and food security. The World Bank's Country Manager for Sri Lanka, Gevorg Sargsyan, noted that achieving the upper-middle-income status is a starting point, not an endpoint.

The country must capitalize on sectors like agrifood, invest in policies, infrastructure, and create an enabling environment for businesses to drive further growth. Despite consecutive quarters of economic expansion and strong fiscal performance, inflation is rising due to higher energy and food prices, and poverty rates remain above pre-crisis levels at 16.9%.

The report highlights the agricultural sector as a key driver for future growth, jobs, and poverty reduction. While primary agriculture makes up about 8% of GDP, the broader agrifood system contributes to a sixth of GDP and over 40% of employment. Export-oriented reforms, productivity-enhancing investments, and improved infrastructure could unlock private investment and expand opportunities for smallholders and rural communities.