COLOMBO, Oct. 7 (Xinhua) -- Sri Lanka's economy is expected to grow by 4.6 percent in 2025, supported by a modest rebound in industry and steady growth in services, before slowing to 3.5 percent in 2026, the World Bank said on Tuesday.
This outlook is subject to heightened risks, including from elevated global uncertainty, the World Bank said in its latest Sri Lanka Development Update titled "Better Spending for All."
While Sri Lanka's recent economic performance has been strong, its recovery remains incomplete, with growth still below pre-crisis levels and poverty significantly elevated, said the World Bank.
Strengthening the recovery will require continued macroeconomic stability, urgent structural reforms, and more efficient, better-targeted public spending, the World Bank added.
To support long-term growth and reduce poverty amid fiscal constraints, the World Bank called for a broad package of reforms aimed at enabling private sector-led growth.
The report said that more than 80 percent of government spending is tied to public sector salaries, welfare programs, and interest payments, leaving little room for growth-enhancing investments in infrastructure, education, and health.
While Sri Lanka has limited scope to significantly increase or cut public expenditure, it could instead focus on maximizing the benefits from its existing levels of public spending, especially on public wages and capital projects, it said. ■
