Economics & Development

Growth is projected to slow from 5.5 percent in 2025 to 2.8 percent in 2026 as the gold-driven boost fades and conflict in the Middle East increases fuel costs and supply risks. Growth is expected to recover to 3.0–3.3 percent in 2027–28 but remain below population growth of 3.4 percent, keeping extreme poverty near 67 percent. Stronger revenue mobilization and reforms to public financial management, fuel, and mining are essential to restore macro-fiscal and debt sustainability.

Uganda’s growth remained robust and broad-based in H1-2026, supported by dynamic private consumption. Inflation remained below target, despite rising fuel-price pressures. External financial inflows boosted reserve accumulation, despite rapid import growth. Fiscal pressures remain elevated amid rising debt-service costs requiring growth-friendly fiscal consolidation and structural reforms supporting debt sustainability, job creation and poverty reduction.

Tanzania’s growth remains strong, supported by infrastructure investment and sound macroeconomic policies although fuel prices have widened external imbalances and raised inflation. Global tensions, and fiscal pressures, including low tax revenues affecting the government’s ability to increase infrastructure and human capital investment simultaneously, pose downside risks. Structural constraints continue to prevent growth from reaching the poor

Growth and employment remain subdued. The energy crisis continues to drag on economic activity, macroeconomic stability, and living standards. High global fuel prices compound fiscal and external pressures. Growth is expected to strengthen as structural reforms address the electricity sector's challenges and unlock the country's considerable natural capital. Poverty reduction is expected to remain slow. The balance of risks is tilted to the downside.

Prudent macroeconomic policy helped growth accelerate to 3.7 percent (GDP at factor cost) in FY26, despite the ongoing Middle East conflict. A prolonged conflict and El Niño pose risks to macroeconomic stability and growth, sustaining high commodity prices while weighing on fiscal and external balances. Maintaining fiscal and monetary prudence is essential to managing these risks, while structural reforms are required to lift growth, raise incomes, and reduce poverty.

Libya’s outlook remains constrained by political fragmentation, weak fiscal governance, and deteriorating basic services, despite progress toward a unified budget and electoral roadmap. Oilproductionrecovery supportedfiscalandexternal surpluses inearly2026,butlowerrevenues, exchange-rate pressures, and rising inflation exposed vulnerabilities. Growth is expected to remain modest, contingent on oil recovery, political consolidation, and stronger economic governance.

Argentina's stabilization has delivered: inflation down to 34 percent, fiscal surpluses since 2024, and spreads around 500 basis points. Growth is moderating to 2.1 percent in 2026, led by capital-intensive agribusiness and energy. Disinflation has stalled. Balancing exchange rate flexibility and price stability poses challenges amid thin buffers and the political cycle. Further poverty reduction requires improving modest labor market outcomes

Following a modest slowing of growth to 3.6 percent in 2025, the first quarter of 2026 signaled resilience amid continued uncertainty. Intensifying price pressures weighed on activity, but wages and remittances continued to support consumption. The outlook remains subject to uncertainty surrounding the Middle East conflict, while the domestic political impasse continues to weigh on reform implementation.

Myanmar's economy remains constrained by conflict, power shortages, and depressed household incomes, limiting its capacity to recover and keeping poverty persistently high. The Middle East conflict has added inflation and foreign-exchange pressures, further eroding welfare. Growth is estimated at 2 percent in FY2026/27, though additional energy, climate, and external shocks could deepen import compression and prolong hardship for vulnerable households.

Timor-Leste is navigating a fiscal transition while growth remains reliant on public spending. Oil and gas production from Bayu-Undan ended in 2025. The Government is pursuing development of fields, but widening fiscal and external deficits increase reliance on the Petroleum Fund. Poverty has declined, but low productivity, limited job creation, and weak diversification persist. Sustainable growth relies on economic transformation, spending efficiency, and revenue mobilization.

Mining is replacing logging as the growth engine, but it creates few jobs, limiting poverty reduction. Inflation is rising and eroding purchasing power. Growth is projected to slow to 2.8 percent in 2026 before recovering to 3.1 percent in 2027, as higher fuel prices and Cyclone Maila weigh on activity. Rising imports, delayed revenue reforms, and spending pressures will widen deficits. Stronger mining governance could convert mineral wealth into development gains.

The North Pacific region sustained positive growth in FY25. Growth projections for FY26 were marginally downgraded for the Federated States of Micronesia (FSM) and the Republic of the Marshall Islands (RMI), reflecting the energy price shock, while Palau’s outlook was upgraded partly due to base effects. Meanwhile, poverty reduction has accelerated in RMI due to policy changes, and may even reverse in FSM due to the recent natural disaster affecting one of its states.

This report assesses how agricultural public spending can better support Sri Lanka’s transformation toward a more productive, resilient, and market-oriented agri-food system. Agriculture remains a critical sector for the economy and livelihoods but faces mounting challenges from economic shocks, food insecurity, climate change, land degradation, and low productivity growth. The study examines public expenditure in food and agriculture from 2017 to 2024 using the FAO MAFAP framework and finds that fragmented and poorly targeted support programs, dominated by input subsidies and import-substitution policies, have limited diversification, discouraged private investment, and constrained export growth. The report highlights the need to shift public spending toward high-value agriculture, value chain development, climate-smart practices, ecosystem restoration, and improved market access. It aims to inform policy reforms that enhance productivity, strengthen resilience, attract private investment, diversify exports, and promote sustainable agricultural growth in Sri Lanka.

The economy contracted 0.3 percent in the first half of 2026, weighed down by mining disruptions, a softening labor market, and rising inflationary pressures. Full-year growth has been revised down to 0.8 percent. The projected recovery to 3.0 percent in 2027 reflects a normalization from 2026’s weak base, with additional support from elevated copper prices and investment-friendly reforms, though significant external risks persist.

Economic growth is expected to increase modestly to 2.4 percent in 2026, supported by recovering private consumption. However, subdued exports, weak industrial production, and uncertainty ahead of the October elections are likely to weigh on economic activity in the near term. Over the medium term, fiscal deficits are expected to remain contained, public debt moderate, and growth to gradually accelerate to 3.1 percent by 2028.