Statistical brief

Sri Lanka’s Labour Market during the Economic Crisis of 2022-2023

Why the unemployment rate does not tell the full story

Sri Lanka’s economy has been hit hard by multiple crises, leading to a debt default and severe economic shock in 2022. This resulted in a deep recession in 2022 (-7.8 per cent GDP growth rate) and while some signs of stabilization are evident later in 2023, the crisis continues to hit the economy hard, especially MSMEs. The impact of the economic crisis on the labour market has, however, not translated (yet) into a sharp rise in the unemployment rate. Instead, the crisis has resulted in a fall in the labour force participation rate for both men and women, which is particularly concerning given the already low female labour force participation rate. The increase in inactivity accounts for most of the decline in employment witnessed during the crisis period. At the same time, out migration of more than 535,000 Sri Lankans for foreign employment (Jan 2022-Sept 2023) has kept a lid on labour market pressures. Over this period, both the number of passport applications and registrations with the Bureau of Foreign Employment have increased significantly, indicating a shift to external job opportunities. Monitoring of these trends and further social dialogue are needed to support a labour market recovery strategy that is both inclusive and sustainable.

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