Sri Lanka’s economy contracts in 3rdQ 2021-DCS

Though Sri Lankan lifestyes were restored to near normalcy from the pandemic, economic growth rate for the third quarter of 2021 is estimated at a negative growth rate of 1.5 per cent, the Department of Census and Statistics (DCS) said in a statement on Wednesday.

It said the Gross Domestic Product (GDP) at constant prices (2010) has decreased to Rs.2,497,489 million by the third quarter of 2021 from Rs.2,536,490 million reported in the third quarter of 2020. In addition, the GDP at current prices rose to Rs.4,132,955 million in the third quarter of 2021 from Rs.4,087,148 million reported in the same period of 2020, recording an increase of 1.1 per cent.

“The third wave of the COVID-19 pandemic, which began in late April 2021, had intensified and peaked by August. The impact of the third wave intensified with a higher increase in the number of COVID-19 infected patients in every district of the island. Infected patients with the new Delta strain were reported to exceed the hospital capacity, with an increase in the number of deaths. This situation again had a negative impact on the expanding economic activities under the new normal situation. Due to the spread of the epidemic throughout the country, the government-imposed quarantine curfew throughout the island from midnight of August 20, 2021 to control the spread of the pandemic. The quarantine curfew was extended from time to time and lasted for 41 days until October 1st,” the DCS said.

The government allowed agricultural activities, many manufacturing industries, construction and selected services to continue even during the quarantine curfew period with the objectives of maintaining the essential commodity supply chain, protect foreign exchange inflow and ensure the household income.

However, those economic activities were hampered by the pandemic and the quarantine curfew. It was observed that the majority of the people exercised self-restraint to escape the danger of this pandemic.

During this period there was a clear decline in the economic activities, especially in the wholesale and retail trade, manufacturing industry, construction industry, transportation, accommodation & food serving and providing private services, the statement said.

At the same time, increased input prices of producers due to import restrictions imposed as a solution for declining foreign money reserves also contributed to the slowdown in economic activity.

Under this situation, many economic activities reported negative growth rates in the third quarter of 2021 compared with the same quarter of the previous year.

After the first wave of the COVID-19 pandemic in 2020 was well controlled by the government, businesses were carried out under the new normal situation as usual.