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Sri Lanka expects 3.5-4.0-pct GDP growth in 2020: CB Governor

ECONOMYNEXT – Sri Lanka is expecting 3.5-4.0 percent growth in gross domestic product in 2020, amid a hit from Coronavirus while inflation would fall back to a targeted 4-6 percent after spiking in January, Central Bank Governor W D Lakshman said.

An outbreak of novel Coronavirus (COVID-19) has weakened external demand but tax cuts would boost the domestic economy, the central bank has said.

Sri Lanka was earlier projecting GDP growth around 3.7 to 4.5 percent for 2020.

Sri Lanka is also expected to go through a cyclical recovery in credit and activity following a currency collapse in 2018. In general about 18 months after a currency crisis ends (the last one ended in January 2020) the economy begins to recover, analysts say.

The central bank is expecting private credit to grow around 12 percent, after falling to around 4 percent in 2019, in the wake of the 2018 currency collapse.

A currency collapse lowers output and pushes up inflation especially as domestic credit starts to recover.

Ashman said inflation ‘overshot projections’ with food prices rising in January but prices have started to fall.

Exchange rate has been stable and foreign reserves are holding, he said.

Officials said the end February forex reserves could be around 7.9 billion US dollars. (Colombo/Mar06/2020)

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