Sri Lanka’s economic growth is projected to slow over the next two years, according to the World Bank’s latest Global Economic Prospects – January 2026 report.
The Bank forecasts the country’s real GDP growth to ease to 3.5% in 2026 and further to 3.1% in 2027, following an estimated 4.6% growth in 2025. The slowdown is attributed to structural market weaknesses, lingering effects of the economic crisis, and softer external demand amid global uncertainty.
Despite these challenges, Sri Lanka’s external position has strengthened, supported by robust remittance inflows and a rebound in tourism, which have bolstered foreign reserves and the current account.
The World Bank also expects the country to maintain a current account surplus, driven by lower global oil prices and resilient remittances, particularly from Gulf countries.
Asian Stocks Slide as Dollar Weakens Amid Trade War Fears
U.S. Futures Drop, Dollar Weakens as Trade Tensions with Europe Escalate
U.S. stock futures fell on Monday after President Donald Trump threatened additional tariffs on eight European countries unless the U.S. is allowed to buy Greenland, sending the dollar lower against safe-haven currencies such as the yen and Swiss franc.
Gold and silver surged to record highs, while oil slipped amid concerns that a full-scale trade war between the U.S. and Europe could hit global growth and demand. A U.S. market holiday contributed to thin trading, with S&P 500 futures down 0.7% and Nasdaq futures falling 1.0%.
European markets also declined, with EUROSTOXX 50 and DAX futures down 1.1%. Japan’s Nikkei lost 1.0%, and MSCI’s Asia-Pacific index outside Japan fell 0.1%.
Trump announced plans to impose 10% import tariffs from February 1 on goods from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland, and Britain, rising to 25% on June 1 if no agreement is reached. European nations condemned the threats as “blackmail,” with France proposing a range of potential countermeasures.
The EU could respond with tariffs on €93 billion ($108 billion) of U.S. imports previously suspended, or measures under its Anti-Coercion Instrument targeting U.S. services and investments. Deutsche Bank analysts noted that European countries hold $8 trillion in U.S. bonds and equities, nearly double the rest of the world, and could consider repatriating some of that capital.
“Given the U.S. net international investment position at record negative levels, the interdependence of European and U.S. financial markets has never been greater,” said George Saravelos, Deutsche Bank’s global head of FX research.
World Bank Projects Sri Lanka’s Economic Growth to Slow to 3.5% in 2026
