World Bank ups Sri Lanka’s growth projection from 2.2% to 4.4% amid economic stability
Daily FT: The World Bank has announced that Sri Lanka’s economy has shown signs of stabilisation, projecting growth to surpass the earlier estimate of 2.2% now expected to reach 4.4% in 2024.
This positive outlook follows four consecutive quarters of growth, primarily driven by the industrial and tourism sectors.
The findings were part of the multilateral donor’s bi-annual report, ‘Sri Lanka Development Update: Opening up to the Future’, released yesterday. Although the forecast is promising, the World Bank warned that the recovery still remains fragile and hinges on maintaining macroeconomic stability, successfully restructuring debt and continuing structural reforms to increase medium-term growth and efforts to reduce poverty.
The report underscores Sri Lanka’s untapped export potential estimated at $ 10 billion annually and could generate around 142,500 new jobs if properly leveraged. It emphasised the importance of diversifying exports across manufacturing, services, agriculture and implementing necessary reforms to unlock this potential.
Despite expected gradual improvements, poverty levels are predicted to remain above 20% till 2026, while inflation is anticipated to stay below Central Bank’s target of 5% in 2024, before gradually increasing as demand picks up. Tourism and remittances are expected to keep the Current Account surplus through 2024. It projects Sri Lanka’s economy to grow at a more modest pace of 3.5% in 2025, as a result of the adverse impacts of the economic crisis.
The report highlighted the need for crucial reforms aimed at boosting exports, attracting foreign investment, enhancing female labour force participation, improving productivity, and addressing challenges such as poverty, food insecurity, and vulnerabilities in the financial sector are crucial for achieving more inclusive and sustainable growth.
Speaking at the report launch, World Bank Country Manager for Sri Lanka and Maldives Gevorg Sargsyan noted that while the country has made faster-than-expected progress in overcoming its economic crisis, the recovery is still in the early stages.
“The good news is that after a very painful economic crisis, Sri Lanka transitioned at a faster pace than expected. The not-so-good news is that the country is not yet out of the woods,” he added.
He also highlighted the severe social consequences of the crisis which saw the poverty rate spike to over 25%, leaving one in four Sri Lankans living below the poverty line. He said the crisis also heavily impacted human development, health, education, and social protection sectors.
Sargsyan stressed the need for hard work and consistent policies to overcome the challenges. “Exports are one of the biggest areas for Sri Lanka to grow. There is an opening for Sri Lanka to deepen its participation in the reshaped global value chains and take advantage of its geographical location. Sustainable growth is the biggest part of the solution to generate jobs and sustain growth,” he said.
To unlock the $ 10 billion annual export potential, Sargsyan called for the removal of bureaucratic obstacles and the creation of a level playing field for domestic and foreign investors to boost investments.
In a detailed presentation, World Bank Country Economist for Sri Lanka Shruti Lakhtakia pointed to the positive economic turnaround seen over the past four quarters, primarily driven by the industrial growth and strong rebound in tourism-related services such as accommodation, food and transportation.
OSL take:
The World Bank’s latest projections are indicative of the overall growth of Sri Lanka, especially in the economic front after facing an economic crisis in the past few years. The increased growth projection is also indicative of the strength and resilience of the country’s overall economy. All these developments stand to boost confidence among foreign businesses/investors to explore the expanding business/investment opportunities in Sri Lanka in-line with the country’s target of becoming a regional hub. Foreign businesses/investors could therefore confidently explore business/investment opportunities in Sri Lanka given the growth and business potential shown by the country’s economy. With the Sri Lankan authorities focusing on further strengthening and expanding the country’s trade ties with other countries, conducting promotional campaigns in foreign markets and introducing incentive schemes to foreign businesses/investors, Sri Lanka is fast becoming an attraction among those seeking opportunities in the country. The growing business potential in Sri Lanka would present many lucrative opportunities for foreign businesses/investors.
Article Code : | VBS/AT/20241014/Z_2 |