The Financial
Express/Dhaka
Sri Lanka's economy grew by 1.6 per cent in the quarter from July to September, official data showed on Friday, as the country claws its way back from its worst financial crisis in more than seven decades following a record fall in foreign exchange reserves, reports Reuters.
The expansion was the first since the end of 2021, with the upturn driven by
a lower base, moderating inflation, a strengthening currency and lower interest
rates, Sri Lanka's Census and Statistics Department said in a statement.
Sri Lanka's agriculture sector grew 3 per cent from a year earlier, with an
increase of 0.3 per cent in industrial output, while services grew by 1.3 per
cent, the department said.
Helped by a $2.9 billion IMF bailout in March, Sri Lanka's economy began a
painful path towards growth. It locked down a second tranche of $337 million
this week, although the IMF has warned the island is not yet out of the woods.
Sri Lanka's economy is expected to contract by 3.6 per cent this year, the
IMF says, after shrinking 7.8 per cent in 2022.
Full-year growth will return next year, with the Sri Lankan economy
projected to grow 1.8 per cent, but challenging reforms lie ahead, such as
higher taxes, reforms to loss-making state enterprises and a complete
restructuring of its foreign debt.
The Central Bank of Sri Lanka has slashed interest rates by 650 bps since
June to boost growth, in parallel with inflation shrinking to 3.4 per cent in
November from a high of 70 per cent last September.
"Economic recovery really took root in the last three months of 2023
with stronger recovery in the services and manufacturing segments," said
Dimantha Mathew, head of research at First Capital. "This means growth
could be as much as 7 per cent-8 per cent for the fourth quarter," Mathew
added.
Photo caption:
A farm worker drives a harvester through paddy fields, amid the
country's worst economic crisis, in Kilinochchi district, Sri Lanka, Jul 28,
2022. REUTERS