Incountrieslike Maldives,Malaysia, Singapore and Spain, tourismand related recreation activitiesplay asignificantrole in the generation of income/foreignexchangeand provision of employment opportunities. Infact, in the global context this industry is identified as the single largest economic contributor. Moreover, tourism playsa crucial role in the attainment of macro economic stability. Besides, the political stability of a country has a major impact on its tourism industry. According to the preceding view, this paper aims at analysing empirically the significance of tourism in the Sri Lankan economy from1970to2008. There lationship willbe analyzed based on a time series approach. The study will end eavour to estimate there lationship between economic performance and tourism revenue, subject to main macro economic variables and political stability of the country. With respect to policy implications, the study recommends that the role of tourism could be highly emphasized in the sustainable economic development with a stable political environment.
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