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Sri Lanka economy to shrink 1.7-pct in 2020: Central Bank

ECONOMYNEXT – Sri Lanka’s gross domestic product is projected to shrink 1.7 percent in 2020, and recover to a 5.0 percent growth in 2021, the central bank said as the country was gripped by a surge in Coronavirus which expanded to several clusters by the end of October.

“In 2020, the economy is projected to contract by 1.7 per cent reflecting the impact of the pandemic induced fallout, particularly in the second quarter of the year,” the central bank said in its Recent Economic Development report which comes before the budget.

“The Sri Lankan economy is expected to rebound in 2021 as evidenced by the fast recovery of activity since the relaxation of the lockdown in May 2020, although a resurgence of COVID-19 cases, as observed in October, could affect the momentum to some extent.”

The central bank is projecting the trade deficit to fall to 6.6 percent of GDP from 9.5 percent as the economy slows and the government foreign borrowings turn negative, shrinking the savings investment gap, which drives the current account deficit.

Total investment would fall to 26.9 percent of GDP in 2020 from 27.4 percent while national savings would go up from 25.3 percent to 25.4 percent.

The current account deficit would shrink from 2.2 percent of GDP to 1.5 percent.

Sri Lanka’s budget deficit would expand to 9.3 percent of GDP in 2020 from 6.8 percent in 2019, the central bank said.

The central bank is expecting annual average inflation – a somewhat difficult concept for people to grasp – to be around 4.7 percent in 2020, from 4.3 percent in 2019. (Colombo/Nov01/2020)

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