Sri Lanka economy reports 4.9% growth in Q2

Sri Lanka’s economy grew 4.9 per cent year-on-year in the second quarter of 2025, official data showed on Monday, indicating a strengthening recovery from its worst financial crisis in decades.

Sri Lanka’s agriculture sector grew by 2 per cent in the second quarter from a year earlier, while industrial output expanded by 5.8 per cent, and services grew by 3.9 per cent, the census and statistics department said in a statement.

Struck by a severe shortage of dollars, the economy went into free fall in 2022, contracting 7.3 per cent as it grappled with soaring inflation, a sharply weaker currency and foreign debt default.

The economy shrank 2.3 per cent in 2023.

But it made a stronger-than-expected recovery last year, posting 5 per cent growth as measures implemented under a $2.9 billion, four-year bailout from the International Monetary Fund, secured in March 2023, bore fruit.

In the first quarter of this year Sri Lanka grew by 4.8 per cent.

The Central Bank of Sri Lanka expects growth to be 4.5 per cent this year, above the 3.5 per cent projected by the World Bank.

The central bank has room to cut interest rates further given inflation is at 1.2 per cent, well below the target of 5 per cent, but is treading carefully to preserve a buffer against potential external shocks, Governor P. Nandalal Weerasinghe told Reuters. The bank’s next policy meeting is on September 23.

Reuters