In its latest review of the South Asian island nation, the World Bank projected that growth would slow to 4.6 percent in 2025 and 3.5 percent in 2026, down from 5 percent last year.

Sri Lanka’s economy experienced its worst recession in 2022, contracting by 7.3 percent, when then-president Gotabaya Rajapaksa was forced to resign following months of street protests.

“While Sri Lanka’s recent economic progress is encouraging, the recovery is uneven and incomplete,” said David Sislen, who covers Sri Lanka for the World Bank.

The poverty rate has declined but remains twice as high as in 2019, Sislen told reporters in Colombo.

“The labour market has been slow to recover,” he said, adding that about 10 percent of Sri Lanka’s 22 million people live just above the poverty line.

Malnutrition remains a serious issue, especially among vulnerable groups, as food prices continue to remain high, the Bank said.

The country defaulted on its foreign debt of US$46 billion in April 2022, and secured a US$2.9 billion four-year bailout from the International Monetary Fund in early 2023.

The leftist administration of President Anura Kumara Dissanayake, who came to power a year ago, has retained many of the austerity measures and high taxes introduced by his predecessor.