Sri Lanka's economy makes strong rebound after worst financial crisis in decades

Sri Lanka's economy grew 5 percent last year, official data showed, beating forecasts, and marking a strong rebound from the country's worst financial crisis in decades.

The economy grew 5.4 percent in the fourth quarter, the Census and Statistics Department said in a statement on Tuesday.

The International Monetary Fund had forecast Sri Lanka would grow by 4.5 percent in 2024.

Sri Lanka's agriculture sector grew 8.3 percent in 2024 from a year earlier, industrial output expanded by 25.5 percent, and services grew by 57.5 percent.

Struck by a severe dollar shortfall, the economy went into freefall in 2022, contracting 7.3 percent as it grappled with soaring inflation, a sharply weaker currency and a historic foreign debt default.

The economy shrank 2.3 percent in 2023.

But it made a stronger-than-expected recovery last year as measures implemented under a $2.9 billion four-year bailout from the IMF, secured in March 2023, bore fruit.

"Growth is significantly higher than any forecasts," Raynal Wickremeratne, co-head of research at Softlogic Stockbrokers, said, adding Sri Lanka's recovery has been swifter than expected.

"We hope tax collection and other measures remain steady... but government projections of 5 percent (growth) will be harder to reach this year, but not outside of the realm of possibility," Wickremeratne said.

The island nation also completed a $25 billion debt rework with bondholders and bilateral creditors including Japan, India and China, last December.

Sri Lanka has posted a "remarkable" recovery from the crisis, the IMF said earlier this month, while approving the fourth tranche of $334 million under the programme.

But the South Asian nation must now boost tax compliance, and implement other measures to support public finances and achieve a 2.3 percent primary surplus target, the IMF has said.

The IMF is projecting growth of 3 percent in 2025 and 2026.

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Source: TRT