Is SL’s economy recovering? CB convinced this is happening
View(s):Is Sri Lanka’s economy on a recovery path? The Central Bank (CB) believes so.
On Thursday, the CB released a slide-show presentation on the economy highlighting that the economy in 2020 had shown a smaller contraction in growth compared to a higher number forecast by multilateral agencies.
In 2020, the IMF said Sri Lanka’s economy will contract by 4.6 per cent in that year while the World Bank and ADB listed the contraction at 6.7 per cent and 5.5 per cent, respectively. In actual fact, according to the Central Bank the contraction in the economy last year was 3.6 per cent according to a March 2021 forecast. The 2020 economic data will be released in April.
In terms of economic growth in 2021, the IMF put it at 5.3 per cent, World Bank (3.3 per cent) and ADB (4.1 per cent) while the Central Bank has forecast growth (according to March projections) at 6 per cent.
The presentation said that in September 2020, amidst global and domestic economic challenges and uncertainties, the Central Bank released a slideshow, suggesting that Sri Lanka is on a steady recovery path.
“We showed that the hard facts and indicators enable us to reasonably conclude that Sri Lanka is on a steady path towards high economic growth…The second wave of COVID-19 posed further setbacks in October/November 2020, but the economy is steadily progressing as displayed in latest economic indicators,” it said in a latest presentation combining March 2021 projections.
Some of the highlights of the presentation:
- The COVID-19 pandemic has been contained to a large extent, and the local immunization drive is continuing.
- The country is experiencing the third consecutive year of a bumper paddy harvest – three million tonnes (2019-2021).
- Tea production has returned to the levels observed in 2019.
- Rubber production is on an upward trend.
- Coconut production has recovered to a great extent.
- Power generation has normalised.
- Data usage has shown strong growth, highlighting continuity of economic activity through online platforms and work-from-home arrangements.
It said industrial production has reached pre-pandemic levels while export earnings recovered and imports remained subdued. Accordingly, the trade deficit narrowed while a notable rebound in workers’ remittances was observed.
Amidst headwinds, the external current account deficit improved. Despite the setback in 2020, a strong pipeline of FDI inflows awaits, particularly with the introduction of the Colombo Port City Commission law.
It said enhanced foreign exchange earnings and increased investment inflows are expected to assist Sri Lanka “in reducing its dependence on external debt and improve macroeconomic resilience……these, along with supportive economic policies and necessary reforms towards improving the doing business environment, will help the country to return to a high growth path in 2021 and beyond”.