Poverty is estimated at 16.9 percent in 2025, down from the 2023 peak of 20.7 percent. It is still above the 2019 rate of 11.5 percent. Real wages still remain 12 percent below pre-2019 levels, the World Bank says.According to the forecast, the economic growth is expected to slow to 4.2 percent as the rebound fades and productivity remains weak.

Renewed inflationary pressures linked to the conflict in the Middle East stalled the recovery in real incomes in the first half of 2026, following two years of improvement. Transport costs, which account for a significant and largely unavoidable share of spending for workers in informal and low-skilled jobs, have risen by about 21 percent. Public sector wages have fallen again in real terms in 2026 after a partial recovery in 2025. The increase in living costs comes before many households have rebuilt the financial buffers depleted during the crisis. In 2026, two-fifths of Sri Lankans are either poor or live within 50 percent of the poverty line, leaving a large share of households vulnerable to further declines in real income, the report says.