COLOMBO, April 10 (Xinhua) -- Sri Lanka's economic growth is expected to moderate to 4 percent in 2026 and climb to 4.2 percent in 2027, following two consecutive years of 5 percent growth, the Asian Development Bank's (ADB) said in a press statement on Friday.
This forecast is based on an early stabilization scenario for the Middle East conflict, according to the Asian Development Outlook (ADO) April 2026, the ADB's flagship economic publication.
ADB said Sri Lanka's recovery held firm in 2025 despite the late-year disruption of Cyclone Ditwah and that private consumption surged amid low inflation and easing interest rates, while remittances hit a record high, as did the primary budget surplus. The current account posted a third consecutive surplus, and official reserves climbed to their strongest level in years.
The ADB said the outlook for 2026 is increasingly shaped by the conflict in the Middle East, even as post-Ditwah reconstruction spending provides some support for growth. Private consumption will remain the main growth driver, though higher inflation will temper household spending power, and private investment is expected to recover only gradually amid heightened uncertainty.
Higher energy costs, potentially weaker remittance inflows, and disruptions to trade and tourism will weigh on household incomes and external buffers and drag on economic growth. Inflation is projected to accelerate to 5.2 percent in 2026, driven largely by the Middle East conflict, ADB said.
ADB Country Director for Sri Lanka Shannon Cowlin said the risks ahead for Sri Lanka are real and significant. Fiscal discipline must be maintained and resilience must be strengthened against the external shocks that will continue to test this economy. At the same time, scaling up and executing public investment will be essential to sustaining the recovery, Cowlin said. ■
