Sri Lanka’s economy full rebound 3-years away: Central Bank
Sri Lanka has been able to restore financial system stability amidst a severe economic and sovereign debt crisis but its economic resurgence to the 2018 level will take about three years, the Central Bank has forecast.
The country was able “to achieve this difficult task amidst a severe economic and sovereign debt crisis in 2022-,”Central Bank Governor Nandalal Weerasinghe told the Financial Stability Conference in Colombo on Monday.
This was achieved without the collapse of a single bank, he said, attributing “this success to timely policy actions, adequate buffers, regulatory measures, and the joint efforts of all financial sector stakeholders, he maintained”.
Macroeconomic stability was maintained by means of tight money policy, fiscal consolidation, and structural reforms.
These measures provided a favourable ground for a bounce back, ending six quarters of contraction in the second half of 2023 with sustained growth in the pipeline. Inflation which had increased to 70 percent in September 2022 fell to the single-digit value in one year due to the tight monetary policy.
In this context the Central Bank has relaxed monetary policy during mid-2023 to achieve economic growth.
The current policy stance remains accommodative, and inflation is projected to maintain below the 5 per cent target through early 2025 before stabilising around that level later in the year, he said. Sri Lanka’s economy will take at least three more years to reach the 2018 level, Assistant Governor of the Central Bank, Dr Chandranath Amarasekara disclosed at a discussion held after a public lecture titled “The Sri Lankan Economy Reflected Through the 2024 Annual Economic Review” in Colombo this week.
It has posted a positive economic growth only in 2021 between 2019 and 2023 in the four years of economic contraction due to COVID-19 pandemic, and the subsequent economic crisis.
He elaborated that Sri Lanka’s real Gross Domestic Product (GDP), which stood at Rs. 13.2 trillion in 2018, had dropped to Rs. 11.9 trillion by 2023. However, it is projected to grow to Rs. 12.5 trillion in 2024.
But with 5 per cent growth in 2024, the economy has started to expand again, reaching Rs. 12.5 trillion GDP, he added.
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