Sri Lanka’s economy is expected to expand by 3.4 percent this year, according to the World Bank. In its report entitled ‘Sri Lanka Development Update,’ the funding agency says the country’s recovery is likely to hinge on foreign investments, as well as the normalisation of tourism and other economic activities.
However, the report also notes that a subdued global recovery may hamper demand for exports while “continued trade restrictions, economic scarring from the slowdown and the high debt burden may weigh on growth prospects” in the medium term.
As the country looks to accelerate its recovery, striking a balance between supporting the economy through the pandemic and ensuring fiscal sustainability will be crucial, and the World Bank points out that a reform programme could serve as a fiscal anchor to help reduce debt vulnerabilities and curtail its sovereign risk.
Meanwhile, the latest LMD-Nielsen Business Confidence Index (BCI) survey – which was carried out in the first week of April – suggests that the outlook is more positive as sentiment improved ahead of the festive season.
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