IMF Lowers SL Growth Forecast
By Mario Andree
After the World Bank (WB) downsised Sri Lanka’s growth forecast for this year by 0.4 per cent, the International Monetary Fund (IMF) too has decided to lower the expectation by a similar figure, saying that the economy would grow at 3.6 per cent in 2021. According to the IMF, the Sri Lankan economy would grow at 3.3 per cent next year and gradually improve to 4.1 per cent by 2026. The IMF also expects Sri Lanka’s inflation to end at 5.1 per cent this year followed by a 6.2 per cent next year and slowdown to 5.2 per cent by 2026 again.
Sri Lanka’s current account deficit which was 1.3 per cent last year is expected to increase to 3.3 per cent this year and then reduce 2.9 per cent in 2022. It would decline to 2.3 per cent by 2026. Last week, the WB lowered Sri Lanka’s growth expectation for 2021 to 3.3 per cent followed by a 2.1 per cent growth in 2022, highlighting that the medium-term outlook was clouded by preexisting macroeconomic weaknesses and the economic scarring from the COVID-19 pandemic. Sri Lanka in 2020 posted its lowest growth rate in history of the country.
According to the Department of Census and Statistics the economy contracted 3.6 per cent. However, Sri Lanka’s gross domestic product (GDP) grew at eight per cent during the first six months (1H) of this year, according to data released by the Department of Census and Statistics, which highlighted that the economy reached Rs 4.56 trillion from Rs 4.23 trillion a year ago. The Sri Lankan economy has posted a 12.3 per cent growth during the second quarter (Q2) of this year, after posting a growth of 4.3 per cent during the first quarter (Q1). Last year, the economy during the second quarter contracted 16.3 per cent, after a contraction of 1.6 per cent during the first quarter.
According to the Department, Agriculture posted a growth of 7.1 per cent during the first six months of this year, while the Industrial sector grew at 12.1 per cent and the Services sector at 5.1 per cent. During the second quarter of this year, Agriculture posted a growth of 8.1 per cent during the first six months of this year, while the Industrial sector grew at 22.1 per cent and the Services sector at 7.5 per cent. The three major economic activities of the economy; ‘Agriculture’, ‘Industry’ and ‘Services’ have contributed their share to the GDP at current prices by 9.2 per cent, 27.0 per cent and 57.9 per cent respectively, while ‘Taxes less subsidies on products’ component have contributed 5.8 per cent of share to the GDP in the second quarter of 2021.