According to the IMF’s October 2026 World Economic Outlook report, titled Resilience Under Strain, Urgent Choices, the country’s economic expansion is expected to moderate over the next year.
Inflation and Current Account Outlook
The IMF forecasts Sri Lanka’s inflation rate to rise to 5.3% in 2026 and 5.4% in 2027, compared with negative inflation of 0.5% recorded in 2025.
Meanwhile, the country’s current account balance is projected to shift from a surplus of 1.6% of gross domestic product (GDP) in 2025 to deficits of 0.5% in 2026 and 0.3% in 2027.
Sri Lanka’s unemployment rate is expected to remain steady at 3.9% in both 2026 and 2027, according to the report.
Global Economic Growth to Slow in 2026
At the global level, the IMF expects economic growth to moderate from 3.5% in 2025 to 3.1% in 2026, before recovering to 3.4% in 2027.
The Fund noted that global economic activity has remained relatively resilient despite ongoing conflict in the Middle East, trade tensions and rising energy costs.
However, it warned that the global outlook remains uneven, with countries facing varying degrees of exposure to energy price shocks, geopolitical uncertainty and changes in global demand.
Growth in emerging markets and developing economies is projected to slow to 3.7% in 2026 before recovering to 4.4% in 2027.
US, China and India Growth Forecasts
Among major economies, the United States is projected to grow by 2.3% in both 2026 and 2027, while China’s economy is expected to expand by 4.5% in 2026.
India is forecast to record stronger growth of 7% this year, according to the IMF projections.
Global Inflation and Economic Risks
The IMF expects global inflation to increase from 4.1% in 2025 to 4.7% in 2026 before easing to 4.1% in 2027, largely reflecting the impact of higher energy and food prices.
The Fund warned that prolonged conflict in the Middle East, disruptions to energy supplies, trade uncertainty and financial vulnerabilities could pose additional risks to global economic stability.
It also stressed the importance of rebuilding fiscal buffers, strengthening energy security and maintaining sound economic policies to support sustainable economic growth.
The projections highlight the challenges facing both Sri Lanka and the global economy as countries navigate geopolitical tensions, inflationary pressures and an uncertain international economic environment.
