Sri Lanka’s inflation-adjusted GDP remains below 2018 levels, poverty has doubled since 2019, and labour market recovery is lagging, the World Bank cautioned in its latest report released Friday (24).
In the ‘10/2025 South Asia Macro Poverty Outlook’, the WB said poverty and malnutrition remain elevated, with real wages still 15% below 2019 levels and labour force participation dropping to its lowest since 2015. Women and urban workers are disproportionately affected.
Despite lower transport and energy costs in early 2025, the impacts of the 2022 economic crisis persist, the report noted, warning that weak capital spending threatens long-term growth.
The Bank urged the government to ensure macroeconomic stability, policy consistency, and structural reforms—particularly tackling rigid labour regulations and excessive public sector reliance—to spur private sector-led job creation.
The report also flagged risks from slower global growth and shifting trade patterns, as well as Sri Lanka’s widening trade deficit, which grew 22.5% year-on-year from January to July 2025.
Medium-term growth is projected at a modest 3.1%, driven mainly by consumption, with weak investment and export contributions.
