Sri Lanka’s economy expanded at a quicker pace than anticipated in the second quarter of 2025, buoyed by lower interest rates that supported business activity and softened the impact of tariff-related pressures.
Gross domestic product (GDP) rose 4.9% in the three months ending June, compared with the same period a year earlier, the Department of Census and Statistics said on Monday. The figure came in slightly above the 4.8% median forecast in a Bloomberg survey of economists. Growth in the previous quarter stood at 4.8%.
The Central Bank of Sri Lanka expects momentum to strengthen further in the coming months and has projected a full-year expansion of 4.5%. Governor Nandalal Weerasinghe has signaled that policymakers remain open to additional monetary easing if conditions warrant, after a quarter-point cut in May was followed by a decision to keep the policy rate steady at 7.75% in July.
While the overall economy showed resilience, certain export-oriented industries continue to face challenges. According to data compiled by Bloomberg, Sri Lanka’s export growth slowed to 6% in the June quarter, compared with 8.1% in the first three months of the year. Apparel and rubber product exports were particularly impacted by tariff-related uncertainties. Still, the country secured some relief by negotiating a 20% levy on its exports to the US, down from the steep 44% imposed in April.
Sector-wise, industrial production rose 5.8% year-on-year in the second quarter, services expanded by 3.9%, and agricultural output increased 2%, official data showed.
Bloomberg noted that Sri Lanka’s ongoing monetary policy easing and improving macroeconomic stability could help sustain growth momentum, although external risks and tariff-related headwinds remain key concerns.
