Sri Lanka Economic Outlook
February 25, 2020Growth in the fourth quarter was likely steady after the third quarter’s acceleration. The downturn in the tourism sector continued to soften in December, while the services PMI hit a two-year high in the same month. However, credit growth slowed up to November and growth in the industrial production index eased in Q4. Shifting to Q1 2020, tourist arrivals declined at a sharper rate in January due to a notable drop in visitors from Asia—likely linked to the coronavirus outbreak. Meanwhile, the IMF concluded its Article IV visit on 7 February. The Fund encouraged “growth-enhancing structural reforms” and fiscal prudence, while also noting the need to build-up reserves to buffer against external shocks. Regarding monetary policy, it called on the Central Bank to continue moving towards a flexible inflation-targeting monetary policy.
Sri Lanka Economic GrowthGrowth should accelerate this year, thanks to a recovery in tourism, favorable credit conditions and a significantly more expansionary fiscal stance—in the form of tax cuts. Moreover, the IMF support program and last year’s election outcome should support business sentiment. FocusEconomics panelists project growth of 3.8% in 2020, which is up 0.1 percentage points from last month’s forecast. In 2021, our panel sees the economy growing 3.9%.
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Sri Lanka Facts
|Exchange Rate||181.2||0.02 %||Jan 01|
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