By Uditha Jayasinghe
(Reuters) -Sri Lanka’s economy grew 5% last year, official data showed on Tuesday, beating forecasts, and marking a strong rebound from the country’s worst financial crisis in decades,
The economy grew 5.4% in the fourth quarter, the Census and Statistics Department said in a statement.
The International Monetary Fund had forecast Sri Lanka would grow by 4.5% in 2024.
Sri Lanka’s agriculture sector grew 8.3% in 2024 from a year earlier, industrial output expanded by 25.5%, and services grew by 57.5%.
Struck by a severe dollar shortfall, the economy went into freefall in 2022, contracting 7.3% as it grappled with soaring inflation, a sharply weaker currency and a historic foreign debt default.
The economy shrank 2.3% in 2023.
But it made a stronger-than-expected recovery last year as measures implemented under a $2.9 billion four-year bailout from the IMF, secured in March 2023, bore fruit.
“Growth is significantly higher than any forecasts,” Raynal Wickremeratne, co-head of research at Softlogic Stockbrokers, said, adding Sri Lanka’s recovery has been swifter than expected.
“We hope tax collection and other measures remain steady… but government projections of 5% (growth) will be harder to reach this year, but not outside of the realm of possibility,” Wickremeratne said.
The island nation also completed a $25 billion debt rework with bondholders and bilateral creditors including Japan, India and China, last December.
Sri Lanka has posted a “remarkable” recovery from the crisis, the IMF said earlier this month, while approving the fourth tranche of $334 million under the programme.
But the South Asian nation must now boost tax compliance, and implement other measures to support public finances and achieve a 2.3% primary surplus target, the IMF has said.
The IMF is projecting growth of 3% in 2025 and 2026.
(Reporting by Manvi Pant in Bengaluru; Editing by Andrew Heavens and Rachna Uppal)
