The World Bank has raised its 2026 growth forecast for Sri Lanka to 4.4 percent, saying the economy has returned to pre-crisis levels but that household recovery is lagging.
In its latest Sri Lanka Development Update, titled “From Recovery to Transformation”, the bank said real GDP grew 4.7 percent in the first half of 2026, bringing output back to its 2018 level after 12 consecutive quarters of expansion.
Poverty stands at 16.9 percent, still significantly above pre-crisis levels, the report said. Inflation has risen in recent months because of higher energy and food prices, it added. Growth is projected to ease to 4.2 percent in 2027.
The bank said future growth will depend more on private investment, exports and productivity than on government spending. It named agribusiness as a sector with potential for jobs and poverty reduction, noting that the wider agrifood system accounts for an estimated one-sixth of GDP and more than 40 percent of employment.
World Bank Group Country Manager for Sri Lanka Gevorg Sargsyan said reaching upper-middle-income status “marks a beginning, not the end”, and that the country needs to create jobs.
The report lists prolonged volatility in global energy markets and the possible effects of El Niño as risks.
