Sri Lankan economy expected to contract by around 3.9 per cent in 2020

By Hiran H.Senewiratne

The Sri Lankan economy is expected to contract by around 3.9 percent  in 2020, Central Bank Governor Deshamanya Professor W. D. Lakshman said.

“With observed developments in the fourth quarter, we expect the economy to record an annual contraction of around 3.9 percent, Lakshman said while delivering ‘The Road Map: Monetary and Financial Sector Policies for 2021 and Beyond.” He made these comments online yesterday.

Speaking further the Governor also said that moving along with the rest of the global economy, Sri Lanka suffered a notable economic setback in 2020, particularly in the second quarter. With inflation remaining under control, the Central Bank took multiple measures on an unprecedented scale to help support the real economy affected by the pandemic.

“These measures, together with stimulus programmes initiated by the government, led to a better-than-expected recovery in economic activity during the third quarter of 2020. The outbreak of the second wave of COVID-19, however, disturbed the momentum of economic recovery to some extent during the final quarter of the year, he said.

The Governor also said that the marginal decline in the first and the relatively large decline in the second quarter of 2020 were followed by a marginally positive growth in the third quarter. “The Central Bank is of the view that continued support through monetary and fiscal interventions is essential to provide adequate impetus to the economy amidst the challenging domestic and global macroeconomic conditions.”

“Therefore, the Central Bank will continue the prevailing accommodative monetary policy stance in 2021 to ensure the envisaged recovery of economic activity. We would, of course, be closely monitoring developments to avoid any strong demand-driven pressures on inflationary trends, he added.