SL’s economic growth projections likely to suffer from adverse developments on global front

Risks to real economic growth projections are skewed to the downside both in the near term as well as in the medium term, as economic activity is susceptible to adverse developments on the global front that affect export recovery, as well as loss in productivity due to outmigration of skilled labour and structural impediments to growth, according to the Monetary Policy Report – February 2024 released by the Central Bank of Sri Lanka.

“Following the rapid disinflation process, current inflation remains closer to the inflation target. However, projections indicate a deviation of inflation from the target, primarily due to amendments to Value Added Tax (VAT) introduced in January 2024, before it retraces towards the target from around end 2024. This uptick in inflation is expected to be short-lived, thereby posing no significant threat to maintaining inflation at the targeted level of 5 per cent over the medium term. On the whole, risks to the near- term inflation projections are skewed to the upside, largely due to supply-side factors, while risks to medium-term inflation projections are balanced. Economic growth is expected to remain,” the report stated.