Colombo, Sri Lanka — September 15, 2025
Sri Lanka has made a strong showing in its economic recovery, recording a 4.9% GDP growth rate in the second quarter (April–June) of 2025 compared to the same period last year. Hiru News
Key Drivers
- Sectoral Performance: Growth was led by the industrial sector (up by 5.8%) followed by services (3.9%) and agriculture (2.0%)—each sector contributing to overall positive momentum. Hiru News
- Domestic Demand & Trade: Increased demand within Sri Lanka, boosted by recovery in tourism and remittances, along with stabilizing external trade conditions, played a significant role.
- Policy Measures: Government reforms, stabilization in foreign exchange flows, and supportive monetary-fiscal policy helped create a more favorable climate for investment and business activity.
Implications for Business & Investment
- A nearly 5% GDP growth is likely to enhance investor confidence, particularly for both local and foreign investors in sectors like infrastructure, manufacturing, and services.
- Employment is expected to benefit, especially in industries tied to trade, tourism, and agriculture that are scaling up production.
- The government will be under pressure to maintain this momentum by ensuring price stability (inflation control), smoothing supply chain constraints, and preserving foreign exchange stability.
Challenges Ahead
Infrastructure & Capacity Constraints: To sustain growth, investments in transport, logistics, power, and digital infrastructure need acceleration.
Inflation & Cost of Living: Continued inflation in food, energy, and transport could dampen consumer purchasing power unless offset by wage growth or subsidy measures.
External Risks: Global conditions – especially volatile fuel or commodity prices, trade tariffs, or disruptions – could impact export-oriented sectors.
