Sri Lanka’s economy grew 4.2 per cent year-on-year in the second quarter of 2026, down from 5.0 per cent in the same quarter of 2025 and slowing from the 5.1 per cent recorded in the first quarter, according to Department of Census and Statistics data reported by EconomyNext and Hiru News.
GDP at constant 2015 prices reached Rs. 3,029,816 million in the April–June quarter, up from Rs. 2,908,570 million a year earlier — an increase of about Rs. 121.2 billion in real output. Hiru reports the estimates were compiled on the production approach.
Where the slowdown came from
The Statistics Department attributed the deceleration chiefly to the Middle East escalation and its effects at home.
“The second quarter of 2026 started with an economic outlook that somewhat gloomy given the escalating tensions in the Middle-East,” the department said in a statement quoted by EconomyNext. “That uncertainty in economic expectations mainly shaped the economic activities in the second quarter with seemingly shortage of crude oil supply. Moreover, the adverse effects were more visible through subdued tourism performance.”
Fuel rationing and higher energy costs followed the government’s fuel price increases during the quarter. The department also flagged weaker growth in accommodation and food serving, financial services and insurance.
The sector split
- Industry expanded 7.3 per cent — the strongest contributor, and the only sector growing faster than the headline rate
- Services grew 2.7 per cent
- Agriculture contracted 2.3 per cent
The agricultural decline is consistent with the drought conditions that have run through much of the year and with the El Niño outlook the Meteorology Department put at 98 per cent probability.
Context
The quarter still marks continued recovery from the 10.6 per cent contraction at the crisis trough in Q1 2023. But it is the first clear deceleration since that recovery began: growth has now stepped down from 5.1 per cent in Q1 2026 to 4.2 per cent, and the 4.2 per cent print sits at the bottom of the Central Bank’s 4–5 per cent full-year projection.
EconomyNext additionally reported industry as contributing 52.7 per cent to total output. That figure is well above industry’s usual share of Sri Lankan GDP and is not repeated by Hiru; it most likely describes industry’s share of the quarter’s growth rather than of output. It is omitted from the sector split above pending clarification.
