With the ongoing energy-crisis brought on by the war in the Middle-East, Sri Lanka, along with Bangladesh and Pakistan have been categorised by the International Air Transport Association (IATA) as nations which run structural risks with severe levels of expected downgrades in growth this year, due to balance of payments risks and currency pressures.
In its latest Global Outlook for Air Transport Energy in Crisis report, in a table titled ‘Estimated downgrade to GDP in percentage points from pre-crisis expectations’, the international trade association for airlines grouped Bangladesh, Sri Lanka, Pakistan together under the category of ‘Structural Risk’ with a ‘Severe’ level of risk.
Sri Lanka’s 2026 economic growth projections have been recently revised downward, with the International Monetary Fund (IMF) cutting its forecast to 3% and the World Bank estimating 3.6%, down from earlier pre-conflict estimates of 4%.
Addressing energy-importing nations with limited policy space, the IATA stated: “As the import bill rises for the energy importers, the level of reserves can fall and local currencies can come under intense pressure against the US Dollar, exacerbating the risk of balance of payments crisis. Such risks are concentrated among developing and low-income energy importers.”
In May, the Sri Lankan Government allocated a sum of Rs 57 billion as a subsidy to cover the increases in oil import prices. In March, Brent and WTI reached $ 119 per barrel, and in April Brent crude oil reached $ 138 per barrel. Between May and June, though Brent eased down from around $ 110 to the high $ 90s per barrel, analysts have since raised their 2026 oil forecasts, as oil shipments face logistical blockages due to the indefinite risk of crossing the Strait of Hormuz amidst the ongoing war of the United States and Israel on Iran.
Within the Asia Pacific region, the airline trade association noted that passenger traffic (RPK) is however to grow by 5.1% in 2026, amidst global passenger traffic projected to grow by 2.1%. “Against this backdrop, global passenger traffic is forecast to grow by 2.1% in 2026. Asia Pacific is expected to grow by 5.1%, constrained by higher costs and weaker external demand in parts of the region.”
In cargo traffic (CTK), specifically, air cargo traffic, the association also noted that Asia Pacific is to remain crucial in driving growth within the global segment, with demand expected to rise by 5.6%. “Asia Pacific is expected to remain the main growth engine, with demand rising by 5.6% YoY in 2026.”
The report notably highlighted that countries within the Asian Pacific and Africa are to benefit from the rerouting of shipping traffic. “Africa and Asia Pacific grow thanks to traffic rerouting.”