WB forecasts Lanka’s GDP to expand by 3.5% in 2025

The World Bank’s ‘Quarter century report card for developing economies’ says that GDP in Sri Lanka is forecast to expand by 3.5% in 2025, an upward revision of 1% point since June largely reflecting stronger industrial activity than previously expected.

Growth will moderate to 3.1% in 2026 but continue to be supported by recoveries in remittances and tourism, partly offset by tightening fiscal policy (World Bank 2024x).

Fiscal adjustment efforts are also projected to continue in other countries, including Maldives, Nepal, Pakistan, and Sri Lanka. Inflation is projected to remain below or within inflation target ranges in most countries, including India, Nepal, and Sri Lanka. The reports predict that the Growth in South Asia (SAR) is expected to remain high over the forecast period, averaging 6.2% in 2025-26, with the high level driven by resilient activity in India.

India is projected to maintain the fastest growth rate among the world’s largest economies, at 6.7% in both FY 2025/26 and FY2026/27.

The services sector is expected to enjoy sustained expansion, and manufacturing activity is anticipated to strengthen, supported by government initiatives to enhance logistics infrastructure. In the Maldives, growth is projected to average 4.7% per year in 2025-26, primarily driven by resilient tourism, while the planned fiscal adjustment is expected to dampen household income and government spending. In Nepal, growth is projected to strengthen to 5.1% in FY 2024/25 and 5.5% in FY 2025/26, mainly reflecting strengthening private investment alongside the expected easing of monetary policy and resilient hydropower exports to India.

In Bhutan, growth is projected to increase to 7.2% in FY2024/25upgraded by 1.5% points from the June projection primarily because of a stronger-than-expected recovery in tourism and non-hydropower industrial activity.

Because of insufficient data, growth forecasts are not produced for Afghanistan but the economy is expected to experience modest expansion, partly supported by moderating inflation.

In Bangladesh, growth is projected to decline to 4.1% in FY2024/251.6% points lower than previous projections.

In Pakistan, growth is projected to strengthen to 2.8% in FY 2024/25 and 3.2% in FY2025/26 upgraded by 0.5% point in both fiscal years since the June forecasts.

The reports say that the Global growth is expected to hold steady at 2.7% in 2025-26. However, the global economy appears to be settling at a low growth rate that will be insufficient to foster sustained economic development with the possibility of further headwinds from heightened policy uncertainty and adverse trade policy shifts, geopolitical tensions, persistent inflation, and climate-related natural disasters.

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