Frontier Insights - Sri Lanka Consumer Quarterly – July 2025

Alongside our growing body of research on consumer demand and the real economy, the Consumer Quarterly is the first in a new series of Sri Lanka-focused reports to be published every quarter on consumer dynamics within the economy. This edition explores the ongoing recovery in consumption patterns within the Sri Lankan economy, the key drivers behind it, the evolving distribution in spending patterns, and our outlook on future consumer demand.

Compared to the past cycles of consumer growth, 2025 is shaping up to be a year where there are many notable differences. The fiscal and external strength that the economy has been clearer, alongside the momentum in consumer strength gathered in 2024, positions the consumer in a distinctive place compared to preceding years.

In this report we’ve incorporated our workings done previously on the consumer demand index, which is used to determine the disposable income that both firms and individuals have, when income inflows have been set off against the fixed expenditures. This is used as a proxy to consumer demand. We’ve used this approach to look at consumer demand in the current context where the economy is now dealing with twin surpluses, and a strong rebound in credit.

For both the years 2025 and 2026, we think there are three key drivers of consumer demand which include; recovering private sector credit growth, relatively higher government spending (salary hikes and higher transfer payments), and better foreign exchange earnings from as indicators like tourism and remittances bounce back. In this report we look at the extent in which these factors have contributed to overall consumer strength, how they have evolved and our forecast in how each of these factors will continue to evolve.

Furthermore, this report also covers how this rising spending power would likely be distributed among the different consumer personas in the economy. This work is based on the consumer personas work we’ve done previously where we’ve divided the consumer into six different brackets, based on their income and expenditure patterns. We’ve linked this into how we see the growth in consumer demand translate across these brackets, and where consumer demand will primarily be driven from.

For further details, the full report; Sri Lanka Consumer Quarterly – July 2025 provides clear explanations for all the mentioned dynamics. If you are a client who has not had a chance to read through it, please click here. Otherwise, get in touch with us to subscribe to our reports (clientconnect@frontiergroup.info).