Sri Lankan economy grew 5.4% in third quarter of 2025

By Uditha Jayasinghe

Dec 15 (Reuters) – Sri Lanka’s economy grew 5.4% year-on-year in the third quarter of 2025, official data showed on Monday, signaling a sustained recovery from the decade’s ‍worst financial crisis in 2022.

The island nation’s economy had grown 4.9% in the preceding quarter.

Sri Lanka’s agriculture sector grew by 3.6% in the third quarter from a year earlier, while industrial output expanded by 8.1%, and services grew by 3.5%, the census and statistics department said in ‌a statement.

The island nation, which was emerging from ‌the worst economic crisis in decades that peaked in 2022, is reeling from a severe cyclone that hit in late November.

Cyclone Ditwah left 643 people dead and at its peak affected nearly 10% of the 22 ​million population. Floods caused by torrential rain damaged crucial infrastructure and the island’s agriculture sector, authorities said.

Growth is projected at 4.5% ‍this year by the central bank ​but analysts say growth could slow to about 3% ​in 2026 due to Ditwah.

“We are expecting a 0.5%-0.7% contraction in ‍the economy due to the cyclone. The impact will be tempered as reconstruction spending, which could be about $2 billion, will also drive growth next year,” said Shehan Cooray, head of research at HNB Stockbrokers.

Sri Lanka, which is already under a four-year, $2.9 billion program ‍from the International Monetary Fund, has sought $200 million in emergency funds from the global lender. The IMF expects the Sri Lankan economy to grow ‍3.1% in 2026.

An ‍IMF team will visit in January for a ​fresh assessment before releasing the sixth tranche of ​the ⁠original program.

The World Bank is making up to $120 ‌million in emergency support available by repurposing funds from ongoing projects.

“This will support recovery and help restore essential services and infrastructure—including health care, water, education, agriculture, and connectivity—in the areas hit hardest by the cyclone,” it said in a statement.

(Reporting by Hritam Mukherjee in BengaluruEditing by Bernadette Baum ⁠and Ros Russell)