Sri Lanka’s economy is on the road to recovery, but sustained efforts to mitigate the impact of the economic crisis on the poor and vulnerable are critical, alongside a continuation of the path of robust and credible structural reforms said World Bank Country Director for Maldives, Nepal and Sri Lanka Faris Hadad-Zervos
While releasing the Sri Lanka Development Update, Bridge to Recovery, report he added that this involves a two-pronged strategy: first, to maintain reforms that contribute to macroeconomic stability and second, to accelerate reforms to stimulate private investment and capital inflows, which are crucial for economic growth and poverty reduction. Looking forward, the report projects a modest pickup in growth of 3% in 2025, with a gradual increase in inflation and a small current account surplus. However, high debt service obligations are expected to exert pressure on fiscal balances.
Poverty rates are anticipated to remain above 22% until 2026. Risks to the outlook remain, particularly related to inadequate debt restructuring, reversal of reforms, financial sector vulnerabilities, and the enduring impact of the crisis. The report emphasizes that strong reform implementation will be fundamental to fostering a resilient economy through continued macro-fiscal-financial stability, greater private sector investment, and addressing risks associated with state-owned enterprises.
The April 2024 edition, Jobs for Resilience, edition also said that South Asia is the fastest growing region in the world and for this India’s growth is the key. World Bank’s Country Manager for Maldives and Sri Lanka, Chiyo Kanda said that the region faces the highest climate change vulnerabilities and the farms are mostly affected by it. Since most of the region’s governments have debt and other priorities it’s the private sector that has to take a lead towards reducing this threat.”
“This report projects South Asia to remain the fastest-growing region in the world, with growth projected to be 6% in 2024 – driven mainly by robust growth in India and recoveries in Pakistan and Sri Lanka. But this strong outlook is deceptive,” says the report. For most countries, growth is still below pre-pandemic levels and is reliant on public spending. At the same time, private investment growth has slowed sharply in all South Asian countries and the region is not creating enough jobs to keep pace with its rapidly increasing working-age population.”
The report recommends a range of policies to spur firm growth and boost employment as well as help lift growth and productivity and free up space for public investments in climate adaptation.
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