Sri Lankans face 2025 with much scepticism and hope that it will be a key link in the road to recovery. The island nation stands at a pivotal moment, where bold and transformative reforms can lead the battered nation towards economic recovery and sustainable development. There is an urgent need for fiscal consolidation, governance improvements, and policy modernisation. By implementing reforms that foster resilience, improve transparency and accountability, attract investments, and ensure equitable growth, Sri Lanka has the opportunity to rebuild its economy, restore public trust in its State and systems, and position itself as a competitive player in the regional and global market.
Despite Sri Lanka’s faster-than-expected recovery compared to the other countries that faced similar situations, sustaining stability in the medium to long run remains conditional on the country’s commitments to pursue necessary economic reforms, the Central Bank of Sri Lanka opined in a recent report. “Achieving a transformative acceleration in growth trajectory is essential to catch up and enhance the growth potential. This would also help enhance the debt-carrying capacity of the country. Building buffers to withstand shocks and accelerating growth without compromising on economic and financial system stability is the essential next step for the country’s progress. In this regard, the Central Bank will continue its role in maintaining domestic price stability and safeguarding the financial system stability, while supporting the economy to reach its potential,” the CBSL said.
Some ‘pundits’ have opined that Sri Lanka’s economic future hinges on one concept – productivity. As the country seeks to recover and grow, boosting productivity in every sector is non-negotiable. This has always been an Achilles’ heel of Sri Lankan trade, with a weak export basket, and sub-par productivity, Sri Lanka has historically been less competitive regionally and where its main markets are; the European Union’s, and the America’s, than it can be. It is clear that this too needs to change. Economic growth must therefore become a key pillar for the Government and private sector in 2025. Yes, there are challenges, bottlenecks, and institutional cultures which will need to be addressed in the process for such a change to take place.
According to some economists, key to reaching more productivity, while sustaining stability, is to ensure that the sources of growth are strong, and sustainability is essential and must now be a priority focus over the medium term.“This includes creating decent jobs, doubling down on efforts to boost exports and foreign direct investment, and guarding against the tendency to reach for inward-looking trade policies. We should introduce pro-competition regulations and programmes that enhance productivity and innovation. We must prioritise these policies and strategies in this recovery and growth phase,” Economist Anushka Wijesinha stated recently.
Commenting on the risks involved in 2025, he stated: that “There are many, both external and internal. Externally, the global economy is undergoing unprecedented shifts: tassels for global influence between traditional Western hegemons and new big powers, the alignment and realignment of power and allegiances among middle powers, and the risk that big power rivalry poses for smaller countries like Sri Lanka. Due to more hawkish and conservative US and European leaders, we need to monitor the redrawing of global trade and investment policies. There is a heightened emphasis on sustainable supply chains and carbon emissions in products imported by our key trade partners. Geopolitical tensions in the Middle East can always threaten oil and commodity prices. These are just some of the risks Sri Lanka will have to watch on the external front.”
Another factor to watch is the domestic policy and governance, where the slow progress of policy change can also impact the productivity of the island. Also, there are risks, in misreading public sentiments, and their impatience with which political promises and relief and anti-corruption agenda is actioned on. As such, the Government, industry and the public have their work cut out for them, there are challenges which need to be met, obstacles which need to be navigated around and populist agenda which need to be managed if we are to get the most of 2025.