Sri Lanka gets back upper-middle income economy status
The World Bank has upgraded Sri Lanka’s status to an upper-middle income economy due to its expansion in the economy supported by a broad-based recovery across industries and growth in tourism and financial services.
i Lanka was earlier upgraded to the upper-middle income in 2019 but lost the status within a year, and then experienced an economic crisis.
According to the World Bank’s latest income classification update released on Wednesday (1 July), the present status of Sri Lanka came three years after the island nation faced a severe economic crisis that pushed the country to the brink of collapse.
In its report, describing the country as “a story of recovery”, the World Bank said, “Just three years after a severe economic crisis brought the country to the brink of collapse in 2022, real GDP grew by 5 percent in 2025, driven by a rebound across industries and growth in financial and tourism services.”
“The reclassification is a marker of resilience, though the country only narrowly crossed the threshold,” it added.
The recovery is attributed to revival in tourism, stronger worker remittances, improving external sector performance and a return to economic growth following two years of contraction.
The reclassification indicates the progress made since then under a far-reaching economic stabilisation effort backed by the International Monetary Fund (IMF), alongside fiscal consolidation, monetary reforms and external debt restructuring.
Earlier, Sri Lanka faced the Easter Sunday attacks in 2019, the Covid-19 pandemic and the subsequent balance-of-payments crisis which culminated in the country’s sovereign default in 2022, pushing the economy into its deepest downturn in decades.
The World Bank has four country income classifications: high, upper middle, lower middle, and low based on gross national income per capita estimates from the previous calendar year. The milestone serves as a symbolic marker of the nation’s economic rebound following its recent financial crisis.
This year’s edition covered 218 countries, and the results will serve as a global reference until the end of June 2027.
Sri Lanka first entered the upper-middle-income category in 2019 before falling back to lower-middle-income status as economic growth slowed and income levels deteriorated amid mounting domestic and external pressures.
IMF upgrades China’s 2026 GDP growth forecast to 4.6pc
The IMF on Wednesday upgraded China’s growth outlook by 0.2 percentage point to 4.6 percent for the year 2026 from the previous projection in April, while downgrading its 2026 global economic growth forecast by 0.1 percentage point to 3 percent, according to its latest world economic outlook report.
In the report released on Wednesday, the IMF said that the outlook is uneven, as the shock from the war in the Middle East is weighing on energy importers and vulnerable economies, while AI-driven demand is lifting countries integrated into the global technology value chain.
Global growth in the first quarter of 2026 surpassed expectations, though the upside was mainly concentrated in economies deeply integrated into global technology value chains, according to the IMF report.
The IMF noted that China’s economy expanded faster than expected at 8.1 percent (based on the IMF staff’s seasonally adjusted estimates), with the expansion driven by front-loaded public infrastructure investment and a surge in high-tech manufacturing and in exports.
In comparison to China’s projected 4.6 percent growth in 2026, the IMF forecast that advanced economies will grow by 1.7 percent, including a 2.3 percent growth in the US and 0.9 percent growth in the Euro area. Meanwhile, emerging market and developing economies are forecast to grow by 3.8 percent, according to the international lender.
The IMF’s move on Wednesday adds to reports by international financial institutions that highlighted China’s resilient economic growth, driven by, among others, its robust high-tech sector.
The World Bank on Tuesday also pointed out in its latest China Economic Update that China’s investment in high-tech sectors grew by 4.5 percent year-on-year in January-May, driven by robust AI-related demand at home and abroad.
The bank projected that China’s economic growth will reach 4.4 percent in 2026, which remains unchanged compared with its previous forecast made in December 2025 for the economy, according to a report sent to the Global Times on Tuesday.
China’s economy stayed resilient in early 2026, supported by strong high-tech investment and exports, and that growth could exceed current projections, the World Bank said.
The OECD in June also said that China’s economy will grow by 4.5 percent in 2026, while global growth will weaken in the time-limited disruption scenario. Growth is set to slow modestly in North America and Europe before a tentative recovery.
Malaysia may hold policy rate
Malaysia will likely hold its benchmark interest rate on Thursday and signal a possible hike later this year as the artificial intelligence (AI) boom drives faster-than-expected economic growth.
According to 24 of 25 economists surveyed by Bloomberg, Bank Negara Malaysia (BNM) is set to keep its overnight policy rate at 2.75 percent, where it has been since July 2025. One analyst called for a 25-basis-point hike.
Malaysia hasn’t raised rates in more than three years, making it among outliers in Southeast Asia. Currency weakness and surging inflation have forced Indonesia and the Philippines to aggressively tighten monetary policy in the face of the Iran war.
Local fuel subsidies have offset the impact of higher crude prices, while surging demand for AI technology has boosted the nation’s exports, according to HSBC Holdings plc economists Yun Liu and Madhurima Nag.
“While some Asean central banks have rushed to hike rates, we do not believe the same conditions apply to Malaysia,” they said, adding that BNM will likely maintain its “cautious optimism on Malaysia’s growth and inflation outlook”.
Australia- India: strategy needs to get beyond New Delhi
Indian Prime Minister Narendra Modi’s visit to Australia this week should give the bilateral relationship fresh momentum. But it should also force a harder question: if Australia wants to engage India seriously, does it have a strategy that reaches beyond New Delhi?
India is not one market. It is many Indias: a continental-scale economy in which power, policy, regulation, industrial capability and opportunity are distributed across states. For Australian business, universities and policymakers, this matters. The India opportunity is not simply “India”. It is Maharashtra, Gujarat, Karnataka, Tamil Nadu, Telangana, Uttar Pradesh, Andhra Pradesh and other state-level networks with different institutions, priorities, capabilities and political economies.
Australia has recognised this before. Peter Varghese’s 2018 India Economic Strategy to 2035(Opens in new window) made the point clearly through its focus on “ten sectors and ten states”. The logic was simple but compelling: Australia cannot engage India effectively by treating it as a single, uniform market. It must focus on where specific Australian capabilities match specific Indian state-level opportunities.
India’s economy is changing rapidly, but unevenly. Technology and global capability centres are concentrated in cities such as Bengaluru, Hyderabad, Pune and Gurugram. Manufacturing opportunities differ across Gujarat, Tamil Nadu, Maharashtra and Uttar Pradesh. Clean energy, critical minerals, infrastructure, agribusiness, health and education all require different state-level strategies. Regulations, incentives, land availability, labour markets and partnership opportunities vary widely.
This means Australian firms cannot simply develop an “India strategy” from Sydney, Canberra or New Delhi. They need India capability: knowledge of particular states, sectors, business networks, regulatory environments and local partners.
Australia has not been standing still. The 2025 roadmap for economic engagement with India(Opens in new window) builds on the Varghese report and focuses on clean energy, education and skills, agribusiness and tourism. It also recognises the role of state and territory governments and Indian-Australian communities. This is welcome. The recent decision to establish a whole-of-nation working group on India(Opens in new window) through Australia’s trade and investment ministerial processes also points in the right direction.
Indonesia’s free meals programme plagued by alleged corruption and waste
Indonesian President Prabowo Subianto’s signature free meals programme is escalating into one of Indonesia’s biggest corruption scandals in years as officials struggle to rein in the $15bn initiative amid allegations of graft and mismanagement.
Launched in 2025, the “Free Nutritious Meals” programme aims to address the chronic issue of stunting among children, improve their focus in school, and stimulate the local economy.
Indonesia nearly halved the prevalence of stunting over the past decade to around 20 percent of children nationwide, according to the World Bank, but it remains stubbornly high in many of the archipelago’s eastern provinces and outer islands.
Over the past 18 months, the programme has rolled out nearly 28,000 kitchens, each supplying schools and communities with up to 3,000 meals a day.
Critics say the programme is too large and unwieldy to be effective, while the initiative has also been plagued by thousands of cases of food poisoning.
The initiative has also drawn global scrutiny since authorities arrested the head of Indonesia’s National Nutrition Agency and two of his deputies in early June for alleged procurement fraud amounting to $56m.
Authorities have since expanded their investigations to seven people, including an active-duty police officer and a military officer.
After spending $2.8bn getting the programme off the ground in 2025, the government in May cut this year’s budget from $18.4bn to $14.7bn following a directive from Prabowo to use funds “more effectively and efficiently”.
But critics like Ronny Sasmita, a senior analyst at the Indonesia Strategic and Economic Action Institution, a Jakarta-based think tank, say that Indonesia cannot afford even a downsized version of the scheme, which is being partly funded by spending reallocated from the health and education budgets.
Worse, Samsmita said, the government has created a massive opportunity for corruption.
70pc of Koreans back pursuing eu-style economic community with Japan: survey
Nearly 70 percent of Koreans support pursuing an EU-style economic community with Japan, while 60 percent of Japanese respondents agreed, according to a survey released Monday by the Korea Chamber of Commerce and Industry (KCCI).
KCCI, which has repeatedly floated the idea of a Korea-Japan economic community as a response to shifting global trade rules, commissioned Hankook Research to survey 500 people each in Korea and Japan.
Some 69.8 percent of Korean respondents favored forming an EU-style bloc, either immediately or over the medium term, versus 59.8 percent of Japanese respondents. Support among Japanese who had visited Korea in the past five years reached 74.5 percent, compared with 45.4 percent among those who had not.
Support for expanded tourism cooperation stood at 76.8 percent in Korea and 58 percent in Japan. A majority in both countries — 60.4 percent of Koreans and 44.8 percent of Japanese — backed allowing travel between the two countries using only a national ID card instead of a passport.
Only 17.5 percent of Japanese citizens held a passport as of February 2025, according to Japan’s foreign ministry.
Opinion was more divided on a mutual visa-recognition scheme, dubbed a “Korea-Japan Schengen,” which would let third-country nationals holding a visa for one country travel to the other without applying separately. KCCI estimates the policy could draw up to 1.84 million additional visitors to Korea. Majorities in both countries also said compatible transit cards and mobile payment systems would improve travel convenience.