ADB warns of rising inflation, slowing economic growth, and mounting pressure on Sri Lanka’s economy as global tensions and energy costs begin to take a toll.
According to the latest economic outlook and data analysis released by the Asian Development Bank, several key shifts are expected to shape Sri Lanka’s economic landscape, financial stability, and trade performance in the coming year.
As outlined in the April edition of the Asian Development Outlook for 2026, inflation, which stood at a negative rate of -0.5 percent in 2025, is projected to reverse sharply and rise to approximately 5.2 percent by 2026, signaling renewed cost pressures.
Although Sri Lanka recorded steady economic recovery and growth of 5.0 percent during 2024 and 2025, the growth momentum is forecast to slow, with the economy expected to expand at an average rate of around 4.0 percent next year.
A major contributing factor to this slowdown is the expected rise in global energy prices, particularly fuel costs, driven by ongoing geopolitical tensions and military developments in the Middle East region affecting global supply chains.
In addition, disruptions to international trade flows, uncertainty in the tourism sector, and a decline in foreign remittances are expected to further weaken economic activity and external earnings for the country.
The report highlights that these combined pressures could significantly impact household income levels, increase the cost of living, and place additional strain on Sri Lanka’s overall macroeconomic stability and fiscal recovery efforts.
