World GDP forecasts raised, but evidence of US slowdown rises: Fitch

Monday September 15, 2025 6:55 pm

ECONOMYNEXT – Sri Lanka’s gross domestic product expanded 4.9 percent in the second quarter of 2025, led by the industries sector followed by services and helped by restriction of vehicle imports and lower interest rates, the state statistics office said.

The island nation grew at 4.1 percent in the same quarter last year.

The economy recorded its eighth consecutive positive growth in the April-June quarter, signaling the continuous recovery.

Industry grew 5.8 percent with manufacturing up 16.6 percent and construction up 8.5 percent.

The agriculture sector grew by 2 percent in the second quarter.

Services were up 3.9 percent, with financial services up 12.3 percent, hotels and restaurants up 10.3 percent.

~..it has been noticed that lifting vehicle import restrictions coincide with relatively low interest rates enriched economy to perform as expected through major economic activities like ‘Wholesale and retail trade, including repair of motor vehicles’, ‘Goods and passenger transport, including warehousing activities’, ‘Financial services activities’, ‘Insurance activities’, as well as ‘Taxes less subsidies on products’,” the statistics office said.

“Furthermore, usual growth stimulators in the Sri Lanka economy, like ‘Construction’ and ‘Mining. and quarrying also reported interesting expansion in the second quarter of 2025. In the meantime, ‘Manufacturing activities’ reported a moderate expansion during this quarter.”

Sri Lanka’s economy is recovering from a contraction in 2022 and early 2023.

Sri Lanka’s central bank has operated largely deflationary policy though concerns are emerging that inflationary policy may re-emerge as attempts to push ‘growth’ or potential output by denying monetary stability as in the past.

The central bank has not yet been able to push up the inflation to its 5 percent target, giving a strong foundation for growth.

Sri Lanka in 2025 grew at 5 percent, higher than the forecasted growth of the IMF and World Bank. The Central Bank has estimated the economy in 2025 to expand at a similar pace like last year. (Colombo/September 15/2025)