Sri Lanka’s Economic Growth Eases to 4.8% in Q1

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%).

Sri Lanka’s economy expanded by 4.8% year-on-year in the first quarter of 2025, easing from a 5.4% growth rate in the previous quarter. While the industrial sector lost some momentum, it remained a key driver of growth, rising 9.7% compared to 13.1% in Q4 2024. Strong performances in manufacturing, mining, and construction underpinned the sector’s resilience. Agricultural activity continued to contract, though at a slower pace (-0.7% vs -2.2% in Q4). Meanwhile, growth in the services sector accelerated modestly to 2.8%, up from 2.5%, driven by robust gains in insurance, financial services, hospitality, IT consulting, and logistics—including postal and courier services.