Sri Lanka’s economy grew by 4.9 percent in the second quarter of 2025, marking the eighth consecutive quarter of positive growth, official data show. The expansion was driven mainly by the industrial sector, which grew 5.8 percent, supported by a 16.6 percent surge in manufacturing and an 8.5 percent rise in construction. Services expanded by 3.9 percent, led by a 12.3 percent increase in financial services and a 10.3 percent boost in hotels and restaurants, while agriculture posted 2 percent growth.
The Department of Census and Statistics noted that lower interest rates and restrictions on vehicle imports contributed to economic stability, enabling wholesale and retail trade, transport, and financial activities to thrive. Mining, quarrying, and construction also provided significant momentum.
On the external front, the Central Bank of Sri Lanka purchased USD 142.5 million from commercial banks in August, bringing cumulative purchases this year to USD 1.24 billion. This compares with USD 2.02 billion in the same period of 2024, when tighter deflationary policy and subdued private credit allowed higher collections.
Analysts caution that while monetary policy in 2025 has remained broadly deflationary, the reliance on unsterilized dollar purchases under the IMF program could risk future instability if inflationary tendencies return. Inflation remains below the Central Bank’s 5 percent target, providing a foundation for continued growth.
The Central Bank expects the economy to expand by around 5 percent this year, outpacing forecasts by the IMF and World Bank, as Sri Lanka consolidates its recovery from the severe contraction of 2022 and early 2023.
