Sri Lanka GDP Grows the Most in Over 3 Years

Sri Lanka's economy expanded 4.8% year-on-year in the fourth quarter of 2025, easing from a 5.4% expansion in the previous quarter. The slowdown was reflected across all three major sectors of the economy, with agricultural activities slowing the most (2.1% versus 3.6% in Q3 2025). Industrial production also slowed (7.3% versus 8.1%), despite recording strong performances for construction (8%), mining and quarrying (20.9%), utilities (10.5%) and manufacture of basic metals (19.1%). Services activities growth eased (3.1% versus 3.5%), supported by increases in wholesale and trade (1.3%), transports (1.2%), real estate activities (2.7%) and financial services (9.7%). Considering the full year, Sri Lanka's GDP expanded by 5% while still recovering from it's financial crisis. The economy is heavily reliant on fuel imports, making it exposed to fluctuations in global energy prices, which have risen since the onset of the Middle East conflict.

Sri Lanka’s economy expanded 5.4% year-on-year in Q3 2025, the strongest growth since Q4 2024 and up from 4.9% in Q2, extending nine consecutive quarters of positive momentum. Agricultural output accelerated to +3.6% (vs. +2.0% in Q2), driven by plant propagation (+46.6%), oleaginous fruits, including coconut (+27.1%), and sugar cane, tobacco, and non-perennial crops (+11.2%). The industrial sector grew 8.1% (vs. +5.8%), supported by construction (+12.2%), mining and quarrying (+17.5%), and manufacturing (+5.3%). Services activity increased 3.5% (vs. +3.9%), with the exception of public administration and defense (-0.9%), while all other sub-sectors posted gains. The strongest contributors were insurance, reinsurance, and pension funding (+18.0%), financial services (+13.2%), and postal and courier services (+10.3%).

Sri Lanka’s economy expanded 4.9% year-on-year in the second quarter of 2025, edging higher from 4.8% in the previous quarter, marking the eighth consecutive quarter of positive growth and highlighting a gradual recovery from the country’s worst financial crisis in decades. The modest acceleration was supported by a 3.9% increase in services output (vs. 2.8% in Q1 2025), driven by most sub-sectors, particularly IT programming and consultancy (+18.7%), financial services (+12.3%), and postal and courier services (+11.6%). Agricultural activity rose 2.0% (vs. -0.7% in Q1), led by gains in animal production (+13.9%), cereal cultivation (+12.4%), plant propagation (+9.5%), and forestry and logging (+9.5%). Meanwhile, the industrial sector expanded 5.8% (vs. 9.7% in Q1), supported by construction (+8.5%), mining and quarrying (+16.6%), and manufacturing (+3.7%).