The World Bank’s Global Economic Outlook 2026 notes Sri Lanka’s improving macroeconomic indicators but warns that recovery is driven more by fiscal tightening and favourable external conditions than by deep structural reform. While the country is expected to maintain fiscal and current account surpluses, growth is projected to slow to just above 3% by 2027, constrained by long-standing inefficiencies in labour and product markets, crisis-related scarring, and fragile global demand.
Key concerns include high emigration of skilled workers, leaving long-term gaps in productivity and innovation, and vulnerability to global trade shocks due to reliance on limited export markets. Risk preparedness also remains weak, with potential losses from disasters like Ditwah not yet factored into projections.
The report emphasizes that fiscal discipline alone is insufficient; sustainable growth requires targeted reforms, strategic labour policies, and resilient export strategies. Sri Lanka has stabilised its economy, but turning stability into inclusive, long-term growth remains the critical challenge.
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