Sri Lanka’s regional economic landscape showed modest signs of diversification in 2024, yet analysts caution that the country remains overly dependent on the Western Province, leaving national growth vulnerable to regional shocks. Provisional GDP estimates indicate that while the Western Province retained its position as the country’s economic powerhouse, its share of national output declined marginally to 42.4% from 44% in 2023. This shift reflects gradual growth in other provinces, but not enough to fundamentally rebalance the economy.
The North Western and Central provinces increased their shares to 11.5% and 10.7% respectively, supported largely by agriculture, food processing, and limited industrial expansion. These gains suggest incremental progress toward regional diversification, yet economists argue they fall short of what is required to reduce systemic risk. Nearly half of Sri Lanka’s industrial output and more than 44% of its services sector remain concentrated in the Western Province, underscoring a structural imbalance that has persisted for decades.
This concentration exposes the national economy to outsized risks. Any major disruption—such as extreme weather events, power shortages, labor unrest, or transport bottlenecks—within the Western Province could have ripple effects across the country. Past experiences with flooding and energy crises have already demonstrated how quickly growth momentum can stall when the Western region is affected.
Agriculture continues to be dominated by the North Western Province, reinforcing regional specialization but also highlighting weak linkages between agricultural regions and higher-value industrial and service activities. Southern and Uva provinces recorded modest GDP growth in 2024, yet their limited participation in manufacturing, logistics, and modern services points to significant untapped potential. Without stronger investment pipelines and infrastructure connectivity, these regions risk remaining peripheral contributors to national growth.
At the macro level, nominal GDP expanded to Rs. 29.9 trillion, reflecting resilience amid ongoing fiscal and debt restructuring challenges. However, economists warn that headline growth masks uneven provincial performance. Employment generation, income growth, and private investment remain skewed toward the Western Province, contributing to persistent regional income disparities.
Analysts also note methodological limitations in the Central Bank’s regional GDP estimates. The top-down disaggregation approach provides a useful snapshot, but it may understate informal sector activity, particularly in rural and estate-based economies. As a result, actual economic contributions from non-Western provinces could be higher than reported, though still constrained by structural bottlenecks.
Looking ahead to 2026, policymakers face a delicate balancing act: sustaining growth in the Western Province while accelerating diversification elsewhere. Targeted regional investment incentives, improved transport and digital infrastructure, decentralized industrial zones, and skill-development programs tailored to provincial labor markets are widely seen as critical. Failure to address these imbalances risks entrenching Western-centric growth, exacerbating inequality and limiting Sri Lanka’s long-term economic resilience even as overall GDP continues to rise.
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