Sri Lanka’s economic growth is projected to slow to 3.5 percent in 2024, reflecting the lingering impact of the 2022 crisis, persistent structural challenges, and growing global economic uncertainty, according to the World Bank’s latest Global Economic Prospects report.
Growth is expected to decline further to 3.1 percent in both 2026 and 2027, as broader global conditions and domestic constraints continue to weigh on economic momentum.
The report paints a cautious picture for South Asia as a whole. After surprisingly weak regional growth of 6 percent in 2024, the pace of activity is forecast to decelerate in 2025, amid rising protectionism, global financial volatility, and policy unpredictability. Regional GDP is expected to ease to 5.8 percent in 2025, before gradually strengthening to 6.2 percent annually in 2026–27, driven by recoveries in major economies.
India’s economy, South Asia’s largest, is projected to grow at 6.3 percent in 2025/26 a 0.4 percentage point downward revision from earlier projections, due to weaker export performance caused by slowing demand in key partner countries and tightening trade policies. However, India’s economy is expected to regain traction in 2026–27, growing at 6.6 percent annually, supported by the services sector and an export rebound.
Bangladesh is forecast to see growth rise to 4.9 percent in 2025/26 and reach 5.7 percent in 2026/27, on the back of investment recovery and improved political stability. Pakistan’s growth is projected at 3.1 percent in 2025/26 and 3.4 percent the following year, aided by declining inflation and borrowing costs.
Meanwhile, Bhutan and Nepal are expected to benefit from expanding hydroelectric power generation, leading to growth upticks, while Maldives’ GDP is forecast to rise 5.7 percent in 2025, slowing slightly to 5.3 percent in 2026 due to a drop in external demand and ongoing trade uncertainties.
In contrast, Afghanistan’s growth is expected to remain modest, at around 2.2 percent in 2025/26, hampered by continued disruptions in international aid and limited external financing.
Across the region, growth prospects remain vulnerable to a wide array of risks. The World Bank warns of the potential for intensified global trade barriers, rising inflation, and tighter global financial conditions—any of which could cause currency depreciation, capital outflows, or investment slowdowns in emerging markets like Sri Lanka.
Other concerns include geopolitical instability, the potential for social unrest, and the increasing frequency of natural disasters, all of which could further derail fragile recoveries in countries still adjusting to post-pandemic realities.
Despite these risks, the report highlights that South Asia’s medium-term outlook remains relatively strong, provided that countries stay committed to reforms that support macroeconomic stability, investment, and export competitiveness.
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