Economy shows signs of recovery; CBSL optimistic

The country’s economy has contracted at the rate of 3.1% in the second quarter of 2023, according to recent data by the Census and Statistics Department. The Department in its estimated Gross Domestic Product (GDP) for the second quarter of 2023, on Friday said that this economic downturn marked an improvement from the alarming 11.5% contraction experienced in the first three months of 2023, indicating a gradual recovery.

The year-on-year GDP growth rate for Q2 2023 registered a negative 3.1%. During the same period, the overall industry and services sectors saw declines of 11.5% and 0.8%, respectively, while agriculture activities grew by 3.6%. The country’s three primary economic sectors, ‘Agriculture,’ ‘Industry,’ and ‘Services,’ contributed 10.4%, 27.0%, and 56.8% to the GDP at current prices, with the ‘Taxes less subsidies on products’ component contributing 5.8% in the same period.

Comparing Q2 2023 to the second quarter of 2022, Sri Lanka’s GDP at constant price (2015) decreased from Rs. 2,680,074 million to Rs. 2,597,441 million. Conversely, the GDP at current prices for the same quarters increased from Rs. 5,442,362 million to Rs. 6,145,451 million, showing a notable 12.9% positive change in the current price GDP.

The Central Bank of Sri Lanka (CBSL) on Thursday in its annual report said that Sri Lanka’s economic challenges were expected to persist into 2023, and projected a 2% contraction for the year. However, the bank expressed optimism, forecasting a 3.3% growth rate for 2024. This cautious outlook follows a tumultuous 2022 when the economy contracted by 7.8%, marked by political instability, surging inflation, and significant currency devaluation due to dwindling foreign exchange reserves.