According to the Central Bank,Sri Lanka’s economic (GDP) growth is expected to ‘decelerate’ by around 1.5 per cent in 2020 from a growth of 2.3 per cent in 2019, before the economy recovers to attain its envisaged potential over the medium term.
The bank in a section titled “COVID-19 and Sri Lanka: Challenges, Policy Responses and Outlook” contained in the CB annual report for 2019 released on Tuesday said that “through various direct and indirect channels, including the ongoing diversion of additional financial resources to support economic activity, the COVID-19 pandemic will adversely impact the progress of the economy during the year, contrary to previous expectations of a rebound in economic growth”.
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According to Central Bank, the nature of the ongoing COVID-19 pandemic is such that its impact on the performance of the Sri Lankan economy hinges on several uncertain factors.
These include the further spread of the pandemic, the intensity and efficiency of mitigation measures, the degree of supply disruptions, and the persistence of behavioural changes and other economic patterns, relevant to both the domestic and global economies.
Although the recovery of global economic activity is likely to be a slow process, measures to achieve normalcy in domestic economic activities could enable Sri Lanka to record a faster recovery, as domestic demand accounts for a significant portion of aggregate demand in Sri Lanka.
Sri Lanka economy grew by 2.3% last year, CB annual report
The Sri Lankan economy recorded a subdued growth of 2.3 per cent in 2019, compared to the growth of 3.3 per cent in 2018, as per the provisional estimates of GDP of the Department of Census and Statistics (DCS). All major sectors of the economy recorded positive, but modest growth rates, according to the Central Bank’s annual report for 2019 released on Tuesday.
The report was formally handed over to Prime Minister and Minister of Finance Mahinda Rajapaksa by Central Bank Governor Prof. W.D. Lakshman and bank officials on Tuesday.
According to GDP estimates based on the expenditure approach, growth in 2019 was driven by consumption growth and the improvement in the external balance of goods and services.
The report said that during 2019, Sri Lanka’s dismal performance continued in terms of real economic growth, although macroeconomic stabilisation measures helped correct the external sector imbalances to some extent, while inflation pressures remained muted on average.
The Easter Sunday attacks had a severe impact on the tourism sector, and their adverse spillover effects were felt across the economy, worsening the sluggish growth of the economy and further dampening business confidence.
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