But Chinese loan funded construction by the state is expected to continue, driving economic activity.
Tourism in particular would be a growth sector with investments flowing in also from overseas.
"Domestic private consumption is anticipated to chart healthy growth due to the expansion of the general economy," RAM Ratings said in an economic outlook for 2013.
"Nonetheless, the Central Bank’s tightening of policies may trickle down to the real economy in 2013.
"Driven by continued support from the Chinese government, investment is expected to increase further, although regressive policies may pose a downside risk."
A key regressive policy is the expropriation of citizens and non citizens which resumed in 2011 through a controversial law.The expropriations may undermine other reformist measures, the report said.
US-based Overseas Private Investment Corporation has reported that it had added a 2-5 percent premium on political risk insurance premiums for loans to the country, the report noted.
Further expropriations of land in privatized plantations firms were announced in a budget for 2012.
A slowing economy may hurt state revenues while rising interest rates may also expand the budget deficit, RAM said, though there were efforts to reduce the budget deficit.
There was also a large defence and urban development ministry outlay for 2013, despite the end of a war, with the breakdown for the two activities not clear. But the report said at least a part of the expenses may be due to paying off old defence loans.
"Export-oriented manufacturing shows a downtrend due to persistently weak demand from traditional export markets," RAM Ratings said.
"On the flip side, a pick-up in investment will boost construction, especially for civil infrastructure projects. The active financial and retail sectors should also lift the services sub-sector."
In 2011 Sri Lanka ran into a balance of payments crisis, as authorities used central bank accommodated credit to manipulate energy prices instead of raising prices and interest rates.
RAM said the rupee may appreciate unless external shocks worsen.
