Synchronous expansion pushes 2Q GDP up 4.9%

• BRINGS 1H GROWTH TO 4.8% AFTER A SIMILAR EXPANSION IN 1Q
• CENSUS AND STATISTICS DEPARTMENTCITES REOPENING VEHICLE IMPORTS AND LOWER LENDING RATES AS CORE PILLARS FOR 2Q GROWTH
• INDUSTRY LEADS 2Q EXPANSION AS SECTOR LOGS IN A ROBUST 5.8% GROWTH
• BACK-TO-BACK GROWTHS OF 5% FOR TWO YEARS APPEAR POSSIBLE WITH 2H NUMBERS TYPICALLY BEING STRONGER

Gross domestic product (GDP), the value of the total goods and services produced by the economy, in the second quarter of 2025 rose by a robust 4.9 percent. This is a pickup from the 4.8 percent growth seen in the first quarter, reflecting the persistent strength in the economy for the last eight quarters straight, since the economy broke the declining spiral two years ago.

The second quarter growth was lifted mostly by the solid showing from the industry sector; other key sectors too grew, helping the economy to expand at a tad faster rate than in the first quarter. Industry grew by 5.8 percent, followed by the services at 3.9 percent and agriculture by 2.0 percent. In the same period last year, which was during the early part of the current expansionary cycle, the three segments grew by 9.7 percent, 1.9 percent and 2.7 percent, respectively. Meanwhile, the services sector continued to remain the largest in the economy, with a share of 58.2 percent, followed by industry, with 25.1 percent and agriculture, with 10.1 percent. The taxes less subsidies on products accounted for a 12.0 percent share of GDP in the second quarter. Coming into yesterday’s GDP print, there was consensus by many, including the Central Bank, for the growth to come in at equally or stronger in the second quarter, as almost all leading economic readings such as the Purchasing Managers’ Indices, industrial production and private sector credit data came in stronger

. The second quarter GDP growth brought the first six months’ growth in the economy to a solid 4.8 percent, compared to the same period in 2024. The Census and Statistics Department attributed the April-June quarter growth mostly to the reopening of vehicle imports, which combined with the lower lending rates, which together provided a massive uplift to the broader economy and more so into some select sectors, which the department identified as notable during the period. “It has been noticed that lifting the vehicle import restrictions, coincided with the relatively lower interest rates, enriched the 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 department said, releasing the much-anticipated GDP print yesterday.

“Furthermore, the usual growth stimulators in the Sri Lanka economy, like construction and mining and quarrying, also reported interesting expansions in the second quarter of 2025. In the meantime, manufacturing activities reported a moderate expansion during this quarter,” it added.