World Bank Optimistic on Sri Lanka’s Economic Recovery with Revised Growth Forecasts
The World Bank has revised its economic growth forecast for Sri Lanka, now anticipating a 2.2% expansion in 2024, as the country rebounds quicker than expected from its most severe financial crisis in recent history.Â
This improvement follows a $2.9 billion financial rescue package from the International Monetary Fund (IMF) in March of the previous year, which has played a critical role in curbing inflation, enhancing state revenue, and restoring foreign exchange reserves after a significant economic downturn in 2022.
Thanks to the IMF’s support, Sri Lanka’s economy is on a path to recovery, expecting to reverse a 2.3% contraction from 2023 and projecting further growth to 2.5% in 2025.
This positive outlook is supported by gradual improvements in reserves, remittances, and tourism, as per the World Bank’s latest South Asia report.
However, Richard Walker, a senior World Bank economist, cautioned that the recovery would be modest over the medium term, highlighting the prolonged impact of the 2022 crisis, which saw Sri Lanka defaulting on its international debt and experiencing record inflation rates.
Despite a recent easing of prices, the poverty rate in Sri Lanka is projected to remain high, with significant challenges ahead in terms of reducing poverty to pre-pandemic levels.
The report also notes the critical need for Sri Lanka to finalize debt restructuring agreements with bilateral creditors, including China, India, and the Paris Club, as part of its IMF bailout terms.
The upcoming presidential elections in 2024 add another layer of complexity to Sri Lanka’s economic stabilization efforts, with the World Bank warning of high downside risks related to fiscal management and the depth of debt restructuring.
In a broader regional context, South Asia (excluding Afghanistan) is set to maintain its position as the world’s fastest-growing region, with India leading at an expected 6.6% growth in fiscal year 2025.
Conversely, Pakistan’s economic growth is forecasted at a more modest 1.8% for fiscal year 2024, slightly below national expectations.
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