COLOMBO, Oct. 6 (Xinhua) -- Sri Lanka's economy has returned to its 2018 level after 12 consecutive quarters of expansion, but household incomes, employment and poverty indicators continue to lag behind the recovery, the World Bank said Tuesday.

In its latest Sri Lanka Development Update, the World Bank projected economic growth of 4.4 percent in 2026, supported by strong industrial activity and steady services growth.

Growth is expected to ease to 4.2 percent in 2027 as the post-crisis rebound loses momentum and weak productivity constrains expansion. The bank also warned that global energy market volatility and a possible El Nino event could affect productivity and food security.

Fiscal conditions have improved, with the primary budget surplus increasing sharply, the update noted.

Despite signals of continued recovery, the country's poverty level remains at 16.9 percent, well above pre-crisis levels, while inflation has risen in recent months due to higher food and energy prices.

The report said Sri Lanka's next phase of growth would require greater reliance on private investment, exports and productivity rather than government spending.

The report identified agribusiness as a major source of the country's future growth, noting that the agrifood system, consisting of food processing, logistics, trade, and food services, contributes about one-sixth of GDP, more than 40 percent of employment and nearly 30 percent of goods exports.

It recommended reforms covering trade policy, infrastructure, agricultural research, climate-smart technologies, land tenure, financing, digital traceability and cold-chain logistics to attract private investment and raise productivity. ■

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