The Central Bank of Sri Lanka’s latest Business Outlook Survey, conducted before the escalation of the Middle East conflict, indicates that business activity continued to expand into early 2026 despite disruption from Cyclone Ditwah in late 2025.
The Business Condition Index recorded an expansion in the fourth quarter of 2025 “amidst the weather-related disturbances, demonstrating resilience in the overall business environment,” the CBSL said. The outlook for the first quarter of 2026 also pointed to continued expansion.
Firms attributed the improvement mainly to relatively low interest rates and subdued inflation, with the services and industry sectors identified as the main drivers of renewed sentiment. The survey, which draws responses from around 100 firms reflecting the structure of Sri Lanka’s GDP, found that demand and sales volumes improved in the fourth quarter of 2025 despite Cyclone Ditwah, while capacity utilisation and investment strengthened year-on-year.
Looking ahead to the first quarter of 2026, firms across services, industry and agriculture expected further year-on-year increases in demand and sales. Profitability and financial conditions were projected to improve, and investment plans remained focused on capacity expansion. Demand for bank credit was expected to rise across all sectors, mainly for operational requirements.
Labour constraints persisted as the main drag on the outlook. The availability of skilled labour was expected to remain below neutral across all sectors in the first quarter of 2026, and both skilled and unskilled labour availability contracted in the fourth quarter of 2025 compared with a year earlier.
The Business Outlook Survey, which the CBSL has conducted since 2014, captures current and forward-looking business conditions based on structured responses from firms across key sectors. The regulator cautioned that the latest survey was completed before tensions in the Middle East escalated, which has since disrupted global energy markets and supply chains and introduced fresh downside risks to the outlook. Brent crude has surged back to $96 a barrel as of Monday, reversing the brief post-ceasefire relief, while Cyclone Ditwah recovery funding remains stalled with a major UN gap.
