Sri Lanka’s GDP is projected to contract by 1.7% this year, reflecting the impact of the pandemic induced fallout, particularly in the second quarter of the year, the Central bank of Sri Lanka said in its latest report titled “Recent Economic Developments: Highlights of 2020 and Prospects for 2021”, which was released last Saturday (31 October).
However, the CBSL expects the economy to rebound in 2021 as evidenced by the fast recovery of activity since the relaxation of the increase in earnings from exports is envisaged in the medium term.
“Economic growth is expected to rebound in 2021 and maintain the upward trajectory over the medium term, supported by pro-growth policies of the Government. Policies to boost domestic production are also expected to ease the pressure on the external sector of the economy on a sustained basis. Nevertheless, the success of containing Covid-19 locally and globally remains critical in determining the pace and the magnitude of domestic economic recovery and revival in the period ahead,” the report stated.
The Sri Lankan economy, which experienced potential growth in recent years, encountered renewed challenges amidst the outbreak of COVID-19.
Reflecting the combined effects of the spread of COVID-19 locally and the introduction of lockdown measures, the slowdown in global economic activity, and the adverse weather conditions in the country, the economy contracted by 1.6% in the first quarter of 2020, year-on-year, as per the provisional estimates of the Department of Census and Statistics (DCS).
GDP estimates for the second quarter have not yet been released by the DCS citing difficulties in capturing the true nature of disruptions and new activities as well as novel ways of working that emerged this year with the onset of the pandemic.