The Impact of Tourism-Related Factors on Economic Growth in Sri Lanka: An Empirical Assessment

Abstract

This study examines the impact of tourism-related factors on Sri Lanka’s economic growth from 1988 to 2023 using a robust econometric approach. Leveraging descriptive statistics, unit root tests, multiple linear regression, the Autoregressive Distributed Lag (ARDL) bounds testing framework, and error correction modelling, the research captures both shortrun and long-run dynamics between tourism and economic performance. Key indicators namely tourism receipts, international tourist arrivals, tourism-related employment, and average duration of stay are analysed against GDP per capita, while political stability, macroeconomic stability, and trade openness are included as control variables. Findings reveal a significant long-term linkage between tourism and economic growth in Sri Lanka, affirming the tourism-led growth hypothesis within the country’s context. Short-run causality tests further demonstrate that fluctuations in tourism metrics have immediate impacts on national economic performance, underscoring the sector’s responsiveness and potential as a rapid growth catalyst. The results highlight tourism’s strategic role in enhancing foreign exchange earnings, generating employment, and fostering sustainable development, even amid geopolitical disruptions and global crises. These insights offer clear, data-driven guidance for policymakers and stakeholders in designing evidence-based strategies to revitalize and sustainably develop Sri Lanka’s tourism sector. By providing a nuanced analysis of tourism’s role in strengthening macroeconomic resilience, this study contributes meaningfully to the tourism-economics literature while supporting Sri Lanka’s ongoing journey toward inclusive and stable economic growth.