Sri Lanka’s growth trails regional neighbours as recovery diverges: World Bank

• South Asia’s major economies show uneven post-crisis trajectories

Sri Lanka is forecast to experience a slowdown in economic growth this year, lagging behind its South Asian neighbours, which are gradually regaining momentum, the World Bank said in its latest Global Economic Prospects report.

“Excluding India, regional growth is forecast to inch up to 3.6 percent in 2025 and firm to 4.4 percent a year in 2026-27, on average,” the report noted, highlighting the divergence within the region.

While Sri Lanka’s growth is expected to decelerate to 3.5 percent in 2025, reflecting persistent structural challenges and crisis aftereffects, countries such as Pakistan and Bangladesh are poised for gradual recoveries. 

Pakistan’s growth is forecast to strengthen to 3.1 percent in FY2025/26 and 3.4 percent in 2026-27, supported by contained inflation and falling borrowing costs. Bangladesh is expected to rebound to a 4.9 percent growth in FY2025/26 and accelerate to 5.7 percent in FY2026/27, driven by improving political stability and investment.

Bhutan and Nepal are also projected to benefit from expanded hydroelectricity generation, bolstering manufacturing and industrial output.

Across the broader South Asia region, growth is expected to moderate to 5.8 percent in 2025 amid the rising trade barriers, global uncertainty and weakening business confidence.

India, the region’s largest economy, is forecast to grow 6.3 percent in FY2025/26, a slight downgrade from earlier projections, due to weaker exports and global trade frictions.

The World Bank flagged the ongoing risks to the regional outlook, including intensified trade barriers, financial market volatility and climate-related disasters.