Sri Lanka expects growth to top 4.0-pct in 2020, too early to assess coronavirus hit

Tourists in Sri Lanka capital wearing masks
TRAVEL WOES: Foreigners wearing masks walk past a restaurant a frequented by tourists in Sri Lanka’s capital Colombo.

ECONOMYNEXT – Sri Lanka’s gross domestic product is expected to grow over 4.0 percent in 2020, but it was too early to assess the impact of an ongoing hit on tourism from a novel coronavirus, central bank officials said.

“It is too early for us to estimate the impact without knowing how long it will last,” Central Bank Deputy Governor Nandala Weerasinghe told reporters.

“There will be an impact (on travel and tourism) but it is too early for us to come up with numbers.”

Weerasinghe said the current forecast was based on broad macro-economic projections.

The main impact will be on travel and tourism and the central bank is looking at what happened during a previous SARS virus to estimated the effects on from the current epidemic, he said.

The World Health Organization has declared the novel coronavirus a global emergency as patients became infected within some countries.

Central Bank Governor W D Lakshman said growth will pick up in 2020, from stronger business confidence, stimulus measure and ‘accommodative policy’ with central bank rate cuts and falling interest rates.

Sri Lanka was projected to grow around 2.7 to 2.8 percent in 2019 after the rupee collapsed from 153 to 182 to the US dollar, generating an output shock and credit contraction.

The travel and tourism sector was also hit by Easter Sunday attacks.

The central bank’s rate setting monetary board cut its policy rate at which money is injected to the market to 7.50 percent from 8.0 percent and the rate that excess money is withdraw to 6.50 percent.

However the agency may print money at below the ceiling rate. Before the cut from 8.0 to 7.5 percent, money was being injected around 7.5 percent.

Sri Lanka cut the rates as inflation picked up, whole operating a ‘flexible’ inflation targeting regime saying the price spikes were temporary. (Colombo/Jan30/2020)