Sri Lanka Foreign Direct Investment (USD bn)

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.