Sri Lanka Economic Outlook
October 20, 2020After a likely GDP contraction in Q2, there were signs of recovery in Q3: Industrial production in July-August recovered, while both the manufacturing and services PMI pointed to an expansion in activity in September. Externally, exports performed much more strongly in July–August relative to Q2 on higher sales of garments. Moreover, workers’ remittances were up in July–August, likely supporting private consumption at home. Moving to Q4, the reimposition of some restrictions in early October amid a surge in virus cases will be dampening momentum. Meanwhile, on 28 September Moody’s downgraded Sri Lanka’s sovereign debt rating to Caa1 from B2 and changed the outlook to stable, citing very large and recurring financing needs ahead, with external debt payments of USD 4 billion due over next year. In a bid to attenuate the debt issue, Sri Lanka is reportedly negotiating a possible USD 500 million loan from China.
Sri Lanka Economic GrowthThis 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, although a possible prolonged tourism downturn and significant debt repayments due to take place next year, together with tight credit access, pose downside risks. FocusEconomics panelists project the economy to expand 2.9% in 2021, which is up 0.1 percentage points from the previous month’s forecast. In 2022, our panel sees the economy growing 4.9%.
Sri Lanka Economy Data
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Sri Lanka Facts
|Exchange Rate||181.2||0.02 %||Jan 01|
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