Double whammy on Lankan economy from floods, drought
View(s):Sri Lanka’s economy took a double-hit in the first quarter of 2017 owing to floods and drought which affected agriculture and inflation and registered a drop in economic growth, according to official data released by the Ministry of Finance.
According to the Ministry’s Mid-Year Fiscal Position Report 2017 published on June 30, economic growth in the first quarter rose by 3.8 per cent, down from 5.5 per cent in the same 2016 quarter while agriculture production received the biggest blow with growth shrinking to record a negative 3.2 per cent against a growth of 1.9 per cent in the same 2016 period.
Tax revenue rose in January-April to Rs. 589,019 million from Rs. 472,689 million earlier while tourism revenue for the 5-month period to May rose to US$1,522 billion from $1,452 billion in the same 2016 period. Workers’ remittances for the first quarter fell to $2.2 billion from $2.4 billion while gross official reserves at the end of March fell to $5.1 billion (equivalent to 3.1 months of imports) from $6.2 billion in the earlier year. Inflation (point-to-point) rose to 6 per cent by end May against 4.8 per cent in the previous year while average inflation doubled to 5.4 per cent by end May against the same period last year (2.7 per cent), the report said.
In other interesting data, the total number of new imports of vehicles rose to 155,942 in January-April against 133,511 the previous year. However the number of three-wheelers saw a sharp 60.2 per cent drop to 4,112 from 13,345 the previous year while there was a drop in motor cars to 13,313 from 15,436. The number of motor cycles rose by 40.6 per cent to 123,999. “. imports of motor cars declined by 13.8 per cent and three-wheelers by 69.2 per cent due to increased tax rates on excise duty,” the report said.
It said that economic growth was mainly driven by the marked improvements in construction, mining and quarrying, financial services, insurance, textile and apparel and inland and marine fishing industry.
“Despite the pick-up of certain economic activities, the contraction of the agriculture sector was mainly attributable to the slowdown in GDP. Prolonged drought condition in certain areas and the floods and landslides in several wet zones in the country adversely affected the value-added production in the agriculture sector,” the report said.
Last week the Government said it planned to immediately import rice from India, Pakistan and Myanmar to meet a domestic shortfall.
The report said the external sector reflected a subdued performance during the first four months of 2017 with the expansion of the trade deficit and the decline of workers’ remittances amidst the increase in earnings from tourism.
The trade deficit expanded by 27.2 per cent to $3,313.8 million during the first four months of 2017 compared to $3,314.3 million in the same period of 2016, reflecting a substantial increase in import expenditure and the moderate increase in earnings from exports.
The Ministry said the stock market regained its momentum during the first five months of 2017 with increased net foreign inflows to the market. The All Share Price Index increased by 1.4 per cent to 6,610 points and the S&P SL 20 Index increased by 10.2 per cent to 3,786 points by end May. The daily average turnover increased by 13.5 per cent to Rs. 901 million at end May compared to Rs. 794 million in the corresponding period of the previous year.