Central Bank Governor predicts over 4% economic growth this year
Sri Lanka’s economic growth will exceed 4 per cent this year due to notable improvement in business confidence caused by political stability and targeted measures taken by authorities to boost demand, Central Bank (CB) Governor Prof. W.D. Lakshman disclosed at a media conference in Colombo on Thursday.
“Revival in economic activity and confidence, fiscal measures, credit relief package and declining interest rates will help sustain the acceleration of credit growth over time,” he predicted.
“There has been notable improvement in the current account, despite disruptions faced in 2019,” he said adding that the exchange rate has remained stable in 2019 and it will remain the same in 2020.
He noted that the Monetary Board, which met on Wednesday, focused on maintaining an accommodative policy stance, reducing interest rates in the process.
This was in line with many developed and emerging markets around the world that were also concerned with a global growth slowdown that has been predicted by the International Monetary Fund and others for 2020.
External sector conditions will be monitored closely and managed with appropriate macro-prudential measures, fiscal and monetary measures, he assured.
The country’s inflation continues to remain in the range of 4 to 6 per cent achieving the target with gradually improving domestic supply conditions while core inflation has decelerated.
“The exchange rate has remained stable, and external sector conditions will be monitored closely and managed with appropriate macro-prudential measures, fiscal and monetary measures,” Prof. Lakshman said.
He expressed concern on the present rising inflation which rose to 6.2 per cent in December 2019 which was a temporary situation due to disrupted supply and elevated demand due to the festive season.
This has not resulted in any overheating in the economy, he said pointing out that reducing policy rates would not drive up inflation to unmanageable levels.
Meanwhile the CB also announced the decision to extend the deadline for a loan moratorium and new credit programme for small and medium scale enterprises (SMEs) to February 10, a senior CB official said.
SME borrowers who have obtained loans less than Rs.300 million have to inform the bank branches they borrowed from before February 10.
The deadline has been extended up to February 10. Customers should make a request from the bank to obtain a moratorium, CB Deputy Governor Dr. Nandalal Weerasinghe said.
“So far we have not received a proper estimate about the possible requests but what we see is the total advances for the banking sector would be Rs. 8 trillion, Deputy Governor H.A. Karunaratne added.
But the SME exposure would be around 10-12 per cent of the total advances he said pointing out that all those exposures have materialized and only around 30 per cent have requested relief.
“Therefore, we don’t see a huge exposure coming from this sector,” he said.
Under the debt relief package introduced by the government, the authorities have stopped banks from taking legal action or imposing fines against those who failed to pay off their debts.
The CB, following directions from the President and Prime Minister has directed commercial banks to extend a one year loan moratorium for both performing and non-performing loans of SMEs, to spur economic growth.
The extension came on the back of the Sri Lanka’s Confederation of Micro, Small and Medium Industries (COSMI) calling for the deadline of the landmark loan moratorium for SMEs offered by the Government to be extended as most companies would struggle to reach the existing deadline of January 31.