Sri Lanka Economic Forecast

Sri Lanka Economic Outlook

June 21, 2022

The country is undergoing its worst financial crisis since it gained independence: Rising commodity prices, a weak tourism sector and a fiscal deficit have caused the rupee’s value to sink since the start of the year. The Central Bank has been unable to defend the currency due to low international reserves, forcing the government to default on some debt payments in May and to suspend imports of basic goods. Meanwhile, soaring inflation and power cuts are hampering economic activity, with the services PMI plummeting 7.5 points in April and continuing to fall in May; schools and government offices were forced to close in late June, boding poorly for activity ahead. A new government was installed in May, with IMF bailout talks its top priority. To this end, it announced a wide range of tax increases in May, which could aggravate social unrest and thus force the president’s resignation.

Sri Lanka Economic Growth

Our panelists continued to lower their forecasts for growth in 2022 this month. The country is now expected to post the weakest growth rate in South Asia. The balance of payments crisis will severely hamper economic momentum, with the country unable to import basic goods, including fuel. Key factors to watch include an IMF deal and the fate of the new government. FocusEconomics panelists project the economy to contract 0.2% in 2022, which is down 1.4 percentage points from last month’s forecast. In 2023, our panel sees the economy growing 3.2%.

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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