Growth in Sri Lanka

Sri Lanka’s economic growth remains uneven. The economy has been resilient to adverse shocks like the ethnic conflict and the devastating tsunami. However, the relatively strong growth record has proved inadequate to substantially reduce poverty beyond the urban areas. Rapid growth in the services and industry sectors has concentrated in urban areas, while stagnation in agriculture has adversely impacted the rural economy where most of the poor live.

Current Status

The economy performed satisfactorily during the last three quarters of 2005, recording above 6% growth in each quarter and ending the year with a per capita income close to US$1,200.

Impediments to Sri Lanka achieving a higher overall growth

  • In the short term, impact of high international oil prices on a small open net oil importing economy with a weak fiscal framework
  • In the medium to long-term, inadequate investments in economic infrastructure (e.g., power, roads)
  • Restrictive labor and land markets
  • Weaknesses in the macroeconomic framework
  • Political uncertainty linked to frequent elections in fragile governments
  • Uncertainty about the prospects for peace

The World Bank’s assistance to Sri Lanka to achieve higher growth

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