Sri Lanka’s economic growth is expected to moderate in 2026, though the overall outlook remains positive on the back of political stability, policy continuity and ongoing reforms, according to a Global Focus country briefing by Standard Chartered Bank.

The bank forecasts GDP growth of 3.5% in 2026, easing from an estimated 4.5% in 2025, with growth supported by low inflation, strong remittance inflows, lower interest rates, a continued recovery in tourism and increased government capital expenditure. Private investment is also expected to improve as supply-side constraints ease.

However, risks remain. The report warns that infrastructure damage caused by Cyclone Ditwah, limited fiscal space, constrained external financing and global economic uncertainty could weigh on the outlook. Continued fiscal consolidation and prudent debt management are described as critical to managing Sri Lanka’s elevated financing needs.

The current account surplus is projected to narrow to 1% of GDP in 2026 from an estimated 1.8% in 2025, as imports rise alongside stronger growth, although remittances and tourism earnings are expected to remain supportive.

Standard Chartered expects the Central Bank of Sri Lanka to keep policy rates unchanged throughout 2026, with inflation forecast at 4.5%. The report also anticipates gradual depreciation of the rupee, with the USD/LKR rate seen at 315 by end-2026.