Sri Lanka Economic Forecast

Sri Lanka Economic Outlook

November 17, 2020

The economy should have recovered somewhat in Q3 after it likely contracted at the height of the pandemic in Q2. Industrial production declined at a much softer rate in July–August relative to Q2. Moreover, the services and manufacturing PMIs were markedly higher in Q3 than in the prior quarter, hinting at strengthening private sector activity. In addition, remittances improved significantly in the same period, boding well for private consumption. Turning to Q4, the economy is facing rising headwinds stemming from fresh restrictions imposed in October following a surge in Covid-19 cases. In other news, the government will present the 2021 budget to parliament on 17 November. According to the appropriation bill published ahead of the budget, next year should see expenditure of LKR 2.7 trillion—USD 14.5 billion or 17% of GDP—above the LKR 2.5 trillion expected spending for 2020. The biggest share will be directed at defense, highways and local government.

Sri Lanka Economic Growth

This year, GDP is set to contract due to the fallout from Covid-19. In 2021, the economy is expected to recover as restrictions ease and foreign demand rebounds. A possible prolonged downturn in the tourism sector and significant debt repayments due to take place next year, together with tight credit access, pose downside risks to the outlook. FocusEconomics panelists project the economy to grow 3.4% in 2021, which is up 0.5 percentage points from last month’s forecast. In 2022, our panel sees the economy growing 4.7%.

Sri Lanka Economy Data

2015 2016 2017 2018 2019
Population (million)21.021.221.421.721.9
GDP per capita (USD)3,8393,8714,0754,0743,831
GDP (USD bn)80.582.187.488.384.0
Economic Growth (GDP, annual variation in %)5.04.53.63.32.3
Consumption (annual variation in %)7.86.92.72.93.5
Investment (annual variation in %)3.85.08.26.6-9.5
Industrial Production (annual variation in %)2.25.74.71.22.7
Unemployment Rate4.74.44.24.4-  
Fiscal Balance (% of GDP)-7.6-5.3-5.5-5.3-6.8
Public Debt (% of GDP)77.779.077.983.786.8
Money (annual variation in %)17.218.917.513.57.6
Inflation Rate (CPI, annual variation in %, eop)4.64.57.22.84.8
Inflation Rate (CPI, annual variation in %)2.24.06.64.34.3
Policy Interest Rate (%)7.508.508.759.008.00
Exchange Rate (vs USD)151.0161.8172.4191.8200.1
Exchange Rate (vs USD, aop)136.1146.2152.5162.6178.7
Current Account (% of GDP)-2.3-2.1-2.6-3.2-2.2
Current Account Balance (USD bn)-1.9-1.7-2.3-2.8-1.8
Trade Balance (USD billion)-8.4-8.9-9.6-10.3-8.0
Exports (USD billion)10.610.311.411.911.9
Imports (USD billion)18.919.221.022.219.9
Exports (annual variation in %)-5.2-2.310.24.70.4
Imports (annual variation in %)-2.51.39.46.0-10.3
International Reserves (USD)7.36.08.06.97.6
External Debt (% of GDP)55.756.659.159.266.6

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Sri Lanka Facts

Value Change Date
Exchange Rate181.20.02 %Jan 01

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