Sri Lanka’s retail sector expects consumer spending to remain subdued in 2026 as inflation, which has climbed above 7%, and uncertainty caused by the Middle East (ME) conflict continues to weigh on household budgets, Sri Lanka Retailers Association (SLRA) Chairperson Hussain Sadique said yesterday (3).
Speaking to The Daily Morning, Sadique stated: “The retail industry, before the war, during the war, and at this moment, is operating in a very uncertain environment. The consumption is happening very cautiously and is expected to remain subdued in 2026, due to the climbing inflation above 7% and the Middle East war conflict. Consumers have increasingly shifted away from impulse buying, spending only on essential goods as economic uncertainty persists.”
“Consumption by most income groups is now driven by a real-need basis, with households postponing non-essential purchases. Even consumers at the higher end of the market, who have been relatively less affected by the current economic environment, have become more conscious about their spending, where unwanted expenditure is contained,” he said.
“Despite weaker discretionary spending, due to the Middle East conflict, demand for essential goods has remained stable,” Sadique said.
“Whatever the scenario, basic consumption is happening whether the war continues or not. Buying household essentials is still happening,” the chairperson added, noting that consumers continue to purchase everyday necessities regardless of external shocks.
Sadique further said: “Retailers have also had to adjust operations under the fuel quota system. Although fuel queues have disappeared, businesses now have to plan their logistics around allocated fuel quotas instead of purchasing fuel freely as they did previously.”
“Looking ahead, with this overall uncertainty, 2026 will continue to be this way. But there would not be any cancellations and we will continue our foreign negotiations based on real needs without taking high risks, since this is a very cautious period,” he said.
He also noted that consumer confidence could gradually recover if geopolitical tensions ease, while the return of normal flight operations would support seasonal spending from foreign visitors. “If the war is expected to ease, there will be a more positive outcome. Once we become more confident, consumption will gradually go up,” he said.
According to the SLRA’s 2025 financial statement: “Sri Lanka’s retail sector has shown signs of recovery, supported by improving household demand and the expansion of digital commerce. However, rising inflation above 7%, currency depreciation, and continued economic uncertainty remain key challenges affecting consumer confidence and spending patterns.”