Sri Lanka, 2018–2022—Transition to Upper Middle-Income Country Status

Abstract

With robust growth over the last decade (2007–2016), averaging about 6% per annum, Sri Lanka is close to becoming an upper middle-income country (UMIC). The key development challenge is to maintain the momentum of rapid inclusive and sustainable growth and advance its UMIC status. The manufacturing and export base of the economy needs to be diversified and the declining trend of exports to gross domestic product (GDP) reversed. This is necessary as the limited size of the domestic market will be a constraining factor for sustaining future growth. With limited public resources, the private sector will need to drive the transformation of the economy. Improving the investment climate, developing growth oriented infrastructure, and enhancing the quality of human resources are necessary for catalyzing domestic private investment and attracting higher foreign direct investment (FDI). To ensure inclusiveness of growth, poverty will need to be further reduced, inequality narrowed, and balanced geographical development supported. Maintaining environmental sustainability is also a challenge and needs to be addressed.