Growth and Stability of Sri Lanka - A Trend Analysis ~ Deveconomics

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Movement of Major Inflation Indicators in Sri Lanka ~ Deveconomics

Key Words

GDP, Real GDP, Nominal GDP, Inflation, CCPI, NCPI, PPI, GDP Deflator, Core Inflation, Headline Inflation, Unemployment

Key highlights

· Strong Economic Recovery
Sri Lanka achieved a 5% real GDP growth in 2025, continuing its recovery after contractions in 2022 (-7.3%) and 2023 (-2.3%).

· GDP Expansion Beyond USD 100 Billion
The economy surpassed the USD 100 billion milestone in 2025, reaching USD 108.84 billion (Rs. 32,751 billion).

· Shifts in Sectoral Contribution
Agriculture’s share declined, industry expanded, and services slightly decreased, while taxes less subsidies increased their contribution to GDP.

· Improvement in Living Standards
Per capita income rose by about 10%, increasing from USD 4,546 in 2024 to USD 5,003 in 2025.

· Low Inflation and Declining Unemployment
Inflation remained low across all major indicators (around 2–3%), while unemployment showed a downward trend, reaching 3.8% in early 2025 before a slight increase to 4.3% in Q3.

Gross Domestic Product

Sri Lanka’s real GDP growth for 2025 was reported at 5%. Although there was potential to achieve a higher growth rate, this was not realized due to the impact of Ditwah in the final quarter of the year. Following consecutive contractions in real GDP in 2022 (-7.3%) and 2023 (-2.3%), the economy recovered to record a 5% growth rate in 2024, maintaining the same momentum into 2025.

As a result, Sri Lanka’s GDP surpassed the USD 100 billion mark in 2025, reaching USD 108.84 billion at current market prices (Rs. 32,751 billion).

The sectoral composition of GDP shows notable shifts. The share of the agriculture sector declined from 7.5% in 2024 to 7.1% in 2025. In contrast, the industry sector increased its contribution from 26.7% to 27.4% over the same period. Meanwhile, the services sector’s share decreased slightly from 59.2% in 2024 to 58.5% in 2025. Additionally, the contribution of taxes less subsidies rose from 6.6% to 7% during 2024-2025.

Furthermore, per capita income increased by approximately 10%, rising from USD 4,546 in 2024 to USD 5,003 (Rs. 1,505,371) in 2025.

Inflation

In 2025, CCPI (Core) inflation was recorded at 2.7%, while CCPI (Headline) inflation stood at 2.1%. During the same period, NCPI (Core) and NCPI (Headline) increased by 2.6% and 2.9%, respectively. The annual Producer Price Index (PPI) was reported at 2.5% in 2025.

Overall, all key indicators reflect a low and stable inflation environment during the year. The following table summarizes the performance of Sri Lanka’s main inflation indicators.

Unemployment

Sri Lanka’s unemployment rate was recorded at 5.5% in 2020 and has shown a continuous decline in subsequent years, reaching 4.4% in 2024. In 2025, the unemployment rate stood at 3.8% in both the first and second quarters, before increasing slightly to 4.3% in the third quarter.

CHART PACK

MOVEMENT OF GDP