Sri Lanka's economic recovery appears to be losing momentum, with former Foreign Minister and senior opposition politician Prof. G.L. Peiris raising serious concerns about the country's slowing growth trajectory. Speaking at a media briefing organized by the People's United Opposition in Colombo, Prof. Peiris warned that the island nation's economic indicators are moving in the wrong direction, even as ordinary citizens continue to struggle with the lingering effects of the country's worst-ever financial crisis.
Economic Growth Rate Falls Sharply in 2025
At the heart of Prof. Peiris's concerns is a notable decline in Sri Lanka's Gross Domestic Product (GDP) growth rate. According to the former Foreign Minister, economic growth dropped from 5.8% recorded in the second quarter of 2025 to a significantly lower figure in subsequent months. This sharp deceleration signals that the recovery momentum the country experienced following the 2022 economic collapse may be running out of steam far sooner than policymakers and international lenders had anticipated.
The slowdown is particularly alarming given that Sri Lanka is still in the process of restructuring its external debt and implementing a series of economic reforms tied to its International Monetary Fund (IMF) bailout program. A sustained decline in growth could undermine the government's ability to meet fiscal targets and restore investor confidence, both of which are critical for the country's long-term economic stabilization.
Inflation Continues to Burden Households
Beyond the headline GDP figures, Prof. Peiris highlighted that inflation remains a persistent and painful reality for millions of Sri Lankan families. Despite government claims of progress in bringing price levels under control, the cost of essential goods, including food, medicine, and fuel, continues to stretch household budgets to the breaking point.
Inflation erodes purchasing power, particularly for low and middle-income families who spend the largest proportion of their earnings on basic necessities. When price pressures persist even as economic growth slows, the result is a particularly damaging combination known as stagflation, a scenario that policymakers find extremely difficult to address without making difficult trade-offs between growth and price stability.
The Central Bank of Sri Lanka has made significant strides in reducing inflation from the catastrophic highs seen during the 2022 crisis, but critics argue that price levels remain uncomfortably high for the average Sri Lankan, and that structural issues driving inflation have not been fully resolved.
Youth Unemployment Remains a Critical Concern
One of the most pressing issues raised by Prof. Peiris was the persistently high rate of youth unemployment in Sri Lanka. Young people entering the workforce are facing a deeply challenging job market, with limited opportunities in both the public and private sectors. This demographic pressure not only represents a wasted economic potential but also carries significant social consequences, including increased emigration, mental health challenges, and growing public disillusionment with the country's economic direction.
Sri Lanka has long struggled with a mismatch between the skills produced by its education system and the demands of the modern labor market. Without targeted investment in vocational training, technology-driven industries, and small and medium enterprise development, youth unemployment is likely to remain a structural problem rather than a cyclical one that resolves itself as the broader economy improves.
Poverty Levels Still Putting Pressure on the Public
Prof. Peiris also drew attention to the continued prevalence of poverty across Sri Lanka, noting that the economic hardships of recent years have pushed many households below the poverty line. While some recovery has taken place since the depths of the 2022 crisis, the gains have been uneven, with rural communities, daily wage earners, and informal sector workers among the most vulnerable.
International organizations including the World Bank have previously noted that Sri Lanka's poverty rate increased significantly during the economic crisis, and that meaningful poverty reduction will require sustained, inclusive economic growth over a prolonged period. A slowdown in growth at this stage risks reversing the modest gains made in poverty reduction and could deepen inequality across the country.
Opposition Calls for Policy Accountability
The media briefing organized by the People's United Opposition served as a platform for the opposition to hold the current government accountable for its economic management. Prof. Peiris and his colleagues argued that the government must take urgent, concrete steps to reverse the growth slowdown, address structural unemployment, and implement policies that provide genuine relief to citizens still suffering from the economic fallout of recent years.
As Sri Lanka continues to navigate its path toward economic recovery, the warnings raised by Prof. G.L. Peiris serve as a timely reminder that macroeconomic stabilization alone is not sufficient. Sustainable recovery must translate into tangible improvements in living standards for all Sri Lankans, and the current trajectory suggests that significant challenges still lie ahead for the island nation's economy.