Sri Lanka economy to grow 3.3-pct in 2020, face fiscal pressure: World Bank

ECONOMYNEXT- Sri Lanka is projected to grow 3.3 percent in 2020 compared to an estimated 2.7 percent in 2019, while managing a tight budget, the World Bank said.

“Sri Lanka’s growth is projected to advance to 3.3 percent in 2020,” the Global Economic Prospects report said.

“The acceleration afterwards will be supported by recovering investment and exports, as long as the security challenges and political uncertainty of 2019 dissipate.”

“Growth is seen to stabilize around 3.7 percent over the rest of the forecast horizon, in line with potential growth.”

The World Bank said low tax revenue and higher public spending in 2019 led to a higher budget deficit, and new tax cuts could put further pressure on the fiscal gap.

“Lack of progress in reforms to improve tax collection could result in more acute revenue shortfalls and put further pressure on elevated fiscal deficits.”

“This could have negative consequences for infrastructure investment, and hence for projected growth, as well as for the fiscal space available to respond to a future cyclical downturn.”

“For countries with elevated debt levels and large current account deficits (Pakistan, Sri Lanka), an unexpected tightening in global financing conditions could sharply raise borrowing costs and lead to stops in capital inflows,” the World Bank said. (Colombo/Jan13/2020)