Sri Lanka’s economy seen recovering, among the slowest in the region: World Bank
ECONOMYNEXT – Sri Lanka’s economic recovery is expected to continue in 2019 and beyond driven by consumption and infrastructure development, the World Bank says, but growth lags behind other countries in South Asia except Afghanistan and political uncertainty is a key risk.
Sri Lanka’s economy grew 3.9 percent in 2018 on the back of a recovery in the agriculture and services sectors, the World Bank said in its annual flagship report for 2019 ‘Global Economic Prospects: Darkening Skies’.
Global economic growth is expected to slow down to 2.9 percent on weakening investment and trade.
In Sri Lanka, last year’s (2018) recovery from adverse weather conditions is expected to continue in 2019, with 4 percent GDP growth," the multilateral bank said.
"Activity will be supported by robust domestic demand as consumption rebounds following natural disasters, and investment is boosted by infrastructure projects".
The World Bank estimates Sri Lanka’s annual GDP growth at 4.1 percent in 2020 and the year following.
This is slowest growing country in South Asia after Afghanistan which will grow 3.2 percent annually in this period.
Pakistan will grow at 4.8 percent annually over 2020-21, Maldives 5.6 percent, Bhutan 6.4 percent, Bangladesh 6.8 percent with India leading the pack at 7.5 percent.
The World Bank warns against external vulnerabilities rising in the region including a further deterioration in current accounts and a faster-than-expected tightening of global financing conditions.
South Asian economies have high levels of public debt in general.
"Fiscal slippages could further worsen already-precarious public debt positions and result in a costly rise in already-elevated interest payments," the bank said.
"In Sri Lanka…external debt is sizable and current account deficits have deteriorated considerably."
Upcoming election cycles in the region are expected to elevate political uncertainty.
"The challenging political environment could adversely affect on-going reform agendas and economic activity in some countries like Afghanistan and Sri Lanka."
Sri Lanka has come out of an unprecedented constitutional crisis, but not unscathed.
The government’s proposed budget for 2019 targets a fiscal deficit of 4.8 percent of GDP, well above an earlier target of 3.6 percent which was agreed to with the International Monetary Fund under an External Fund Facility programme.
Markets are uncertain than ever and business sentiment is low.
Rating agencies have downgraded the country’s sovereign credit ratings. (COLOMBO, 09 January 2019)