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Sri Lanka Economic Forecast

Sri Lanka Economic Outlook

After shrinking 4.8% in H1 2022, GDP plummeted 11.8% in Q3 in annual terms. Consumer spending and fixed investment fell more rapidly, while government consumption and exports grew at a weaker pace. The economy also likely contracted in Q4, as the factors which caused Q3’s plummet—out-of-control inflation and goods shortages—persisted. Industrial production sank 24% and the manufacturing and services PMIs averaged in contractionary territory in the quarter. For a sustained economic recovery to take hold, Sri Lanka’s creditors need to agree to a debt restructuring plan, which would pave the way for a USD 2.9 billion loan from the IMF. India said it backed Sri Lanka’s plan in January, as did the Paris Club in February. The only major holdout now is China.

Sri Lanka Inflation

Inflation in Colombo eased further to 54.2% in January (December: 57.2%). Core inflation in Colombo also fell slightly. Inflation should decelerate this year due to softer domestic demand. The key outlook risks are commodity prices and fiscal and monetary policy. On 25 January, the Central Bank kept its standing lending facility rate unchanged at 15.50%.

Sri Lanka Economic Data

2017 2018 2019 2020 2021
Population (million) 21.4 21.7 21.8 21.9 22.2
GDP (USD bn) 94 94 89 84 89
GDP per capita (USD) 4 4 4 3 4
GDP (LKR bn) 14 15 15 15 17
Economic Growth (Nominal GDP, ann. var. %) 12.3 6.7 3.6 -1.5 12.3
Economic Growth (GDP, ann. var. %) 6.5 2.3 -0.2 -4.6 3.5
Private Consumption (ann. var. %) -0.6 4.7 3.8 -5.8 6.2
Government Consumption (ann. var. %) 5.5 18.7 6.6 3.6 3.1
Fixed Investment (ann. var. %) 12.1 0.6 -10.6 -9.8 10.1
Exports (G&S, ann. var. %) 7.7 5.4 1.7 -29.6 10.3
Imports (G&S, ann. var. %) 6.7 3.3 -3.5 -20.1 4.1
Industrial Production (ann. var. %) 2.5 0.8 1.3 -10.2 7.3
Unemployment (% of active population, aop) 4.2 4.5 4.8 5.5 5.2
Fiscal Balance (% of GDP) -5.5 -5.3 -9.6 -11.1 -12.2
Public Debt (% of GDP) 77.9 84.2 86.9 100.6 104.6
Money (ann. var. of M2 %) 17.5 13.5 7.6 22.9 13.5
Inflation (CCPI, ann. var. %, eop) 7.1 2.8 4.8 4.2 12.1
Inflation (CPI, ann. var. %, aop) 6.6 4.3 4.3 4.6 6.0
Standing Lending Facility Rate (%, eop) 8.75 9.00 8.00 5.50 6.00
Exchange Rate (LKR per USD, eop) 153.5 182.9 181.4 185.3 202.8
Exchange Rate (LKR per USD, aop) 152.6 162.6 178.7 185.5 198.5
Current Account Balance (USD bn) -2 -3 -2 -1 -3
Current Account Balance (% of GDP) -2.4 -3.0 -2.1 -1.4 -3.8
Merchandise Trade Balance (USD bn) -10 -10 -8 -6 -8
Merchandise Exports (USD bn) 11 12 12 10 12
Merchandise Imports (USD bn) 21 22 20 16 21
Merchandise Exports (ann. var. %) 10.2 4.7 0.4 -15.9 24.4
Merchandise Imports (ann. var. %) 9.4 6.0 -10.3 -19.5 28.5
Foreign Direct Investment (USD bn) 1 2 1 0 1
International Reserves (USD bn) 8 7 8 6 3
International Reserves (months of imports) 4.6 3.7 4.6 4.2 1.8
External Debt (USD bn) 51 53 56 56 57
External Debt (% of GDP) 53.8 56.0 63.0 66.6 63.8

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