The Sri Lankan economy shows signs of steady growth with Gross Domestic Product (GDP) growing by +5.5% YoY (vs. +1.6% growth in 3Q2023). For the 1-3Q2024, GDP grew by +5.2% YoY, (a significant recovery from the contraction of -4.5% YoY in 1-3Q2023. GDP is forecast to grow by +4.6% YoY in 2024 end and +3.6% YoY in 2025 end said CT CLSA – Economic Update.
‘’This performance exceeded our expectations. The growth was driven by positive developments across all three major economic sectors, with the highest growth seen in the industrial sector,’’ Economic growth is expected to further accelerate in 2025 by continued expansion in the tourism, financial services, construction and textile manufacturing sectors. The macroeconomic environment is set to remain broadly positive with further easing of disposable income pressures. This will support consumption growth, assisted by a low interest rate regime and a deflationary backdrop.
With positive growth prospects across key economic sectors and stable macroeconomic conditions, we expect that the industrial sector will drive GDP growth to +4.6% YoY in 2024, an upward revision from our previous forecast of +3.8%. The stability of the LKR has contributed to lower import costs, stimulating domestic consumption. This has created room for increased production activities and an improvement in disposable income. The recovery in the construction sector was particularly strong during the 3Q-2024 and we expect this momentum to continue in the coming quarters. Other sectors including tourism, insurance, power generation, mining and quarrying also saw commendable growth during the 1-3Q-2024.
The recovery was underpinned by the easing macroeconomic constraints and appreciation in the LKR. The industrial sector reported the strongest growth during the period. Key drivers of this growth included a strong performance in construction, mining and quarrying, electricity generation and the manufacture of textiles and apparel. The industrial sector saw a robust recovery, particularly in construction, mining and quarrying, electricity generation, and the manufacture of basic metals.
