Business
SL outperformed international peers on economic performance in 2020, says Central Bank
by Sanath Nanayakkare
In 2020, the performance of the Sri Lankan economy beat expectations of multilateral agencies, a Central Bank report released to the media stated yesterday.
The IMF projected Sri Lanka’s GDP projection for 2020 at -4.6%, while the World Bank and Asian Development Bank projected it would be -6.7% and -5.5% respectively, but the Central Bank of Sri Lanka made its GDP projection at -3.6% which turned out to be the real figure for the year, the Central Bank said.
The second wave of COVID-19 posed further setbacks in October/November 2020, but the economy is steadily progressing as displayed in latest economic indicators, it said.
Some indicators and details gleaned from the report are as follows.
COVID-19 pandemic has been contained to a large extent with the reported 90,514 Covid-19 infection cases and 551 deaths to date, while the local immunisation drive is continuing in the country allowing space for the economy to progress steadily.
The country is experiencing the third consecutive year of bumper paddy harvest. Tea production has returned to the levels observed in 2019. Rubber production is on an upward trend.Coconut production has recovered to a great extent. Electricity generation has normalised.
Industrial production has reached pre-pandemic levels with purchasing managers’indices show positive sentiments across manufacturing and services. Export earnings recovered, while imports remained subdued. narrowing the trade deficit.
Also backed with a notable rebound in workers’ remittances, the external current account deficit improved.
Despite the setback in 2020, a strong pipeline of FDI inflows awaits, particularly with the introduction of the Colombo Port City Commission law.
Recent policy measures have enabled a gradual absorption of forex related to workers’ remittances and exports proceeds, towards building forex reserves.
Debt servicing obligations were duly met, dispelling adverse speculation and uncertainties caused by the unwarranted sovereign rating downgrades.
The Colombo Stock Exchange displayed its potential as business confidence has retuirned.
Given subdued levels of inflation and inflation expectations, the Central Bank conducted monetary policy with a focus on supporting the economic recovery.
Monetary policy easing measures have resulted in historically low interest rates, thereby passing the benefit of low inflation to entrepreneurs.
Credit to the private sector is expanding as expansionary policies have been supported by well managed inflation and inflation expectations.
The novel economic model of the government is focused on strengthening macroeconomic fundamentals to realize economic aspirations for 2021.
Macroeconomic aspirations for 2021:
GDP Growth 6%, Per Capita GDP US$ 4,000, Trade Gap US$ 4 bn, External Current Account Surplus US$ 500 mn, Official Reserves US$ 5.5 bn, Budget Deficit 8.9% of GDP, Foreign Share of Debt to GDP 35% of GDP, Private Sector Credit Growth Rs. 850 billion and inflation 4.6%.