Fostering workforce skills through education

Empowered Sri Lanka, Sri Lanka’s development policy document, envisions reorienting the country toward a modern and high-value-adding economy that is able to compete effectively in the global market. Expanding the middle class and improving the living standards by creating 1 million jobs are at the core of the policy. This employment diagnostic study—Sri Lanka: Fostering Workforce Skills—seeks to support the realization of that vision.

Overall, the Sri Lankan economy continued to grow strongly in the 2000s despite domestic and global shocks. Sri Lanka’s economy expanded at an average annual growth rate of 6.4% during 2004–2015. The economic growth, however, has been episodic. After dipping to 3.5% following the global financial crisis of 2008, postwar recovery and expansion pushed the rate over 9% in 2012. Growth then weakened to an average of 4.4% in recent years, which is attributed to internal and external factors including the winding down of debt-financed post-recovery infrastructure projects and the reduced demand for exports. With relatively good economic growth, the country achieved middle income status in 2010 and is projected to achieve upper middle-income status in the next few years. Several factors explain the recent healthy income growth per capita. First, the population increased only 0.8% from 2004 to 2015, even while gross domestic product (GDP) per capita purchasing power parity almost doubled to more than $11,000 in 2015.1 Second, value-added per worker expanded across all economic sectors (except agriculture) and especially in manufacturing, where productivity growth was high during 2006–2014. Third, the major public sector infrastructure development projects have been playing a pivotal role to underpin economic growth.