Sri Lanka’s gross domestic product (GDP) contracted 4.8 per cent during the first half of this year according to the Department of Census and Statistics, which said the economy reached Rs 6.245 trillion from Rs 6,558 trillion a year ago.
The economy during the second quarter of this year posted a contraction of 8.4 per cent after contracting 1.6 per cent during the first quarter.
During the first half, Agriculture, Industrial and Services sectors recorded contractions of 7.6 per cent, 7.1 per cent and 0.6 per cent respectively.
During the second quarter Agriculture, Industrial and Services sectors recorded contractions of 8.4 per cent, 10 per cent and 2.2 per cent respectively.
The three major economic activities of the economy; ‘Agriculture’, ‘Industry’ and ‘Services’ have contributed their share to the GDP at current prices by 10.2 percent, 32.0 percent and 49.4 per cent respectively, while ‘Taxes less subsidies on products’ component has contributed 8.4 per cent of share to the GDP in the second quarter of year 2022.
Due to the current economic situation of the country, which led to many shortages and steep depreciation of the Sri Lankan Rupee, the Central Bank of Sri Lanka is estimating that the gross domestic product would shrink more than eight per cent this year.
Central Bank Governor Nandalal Weerasinghe earlier said that the Government was expecting the Sri Lankan economy to shrink 7.5 per cent this year, however, due to the current situation it would contract more than 8 per cent.
According to him the higher the contraction the faster the country would recover.
The impact of persisted supply side disruptions, primarily due to shortages of power and energy and uncertainties associated with socio-political developments are expected to have caused significant adverse effects on economic growth in Q2 2022, the Central Bank said in a statement.
The impact is expected to have continued through Q3 2022 as well, it said.
That, coupled with the already recorded negative growth in Q1 2022 and contractionary policies, could result in a larger than expected contraction in real activity in 2022, it said.
However, real GDP growth is expected to recover in the period ahead, with the envisaged stabilisation of macroeconomic conditions and implementation of structural reforms in the economy, it said.
Sri Lanka’s current economic crisis has affected the growth of the South Asian Region according to the Asian Development Bank, which lowered South Asia’s growth expectation to 6.5 per cent in 2022 from 7 per cent and to 71 per cent in 2023 from 7.4 per cent.
According to the Asian Development Outlook Supplement for July 2022, by the Asian Development Bank, Sri Lanka’s economy is expected to contract 7.6 per cent this year.
“South Asia’s growth forecast is lowered mainly due to the economic crisis in Sri Lanka and high inflation and associated monetary tightening in India,” the Asian Development Bank said.
By Mario Andre