Sri Lanka’s Central Bank predicts country’s economic rebound in 2021
Sri Lanka’s economic growth is expected to rebound in 2021 and maintain the upward trajectory over the medium term, supported by pro-growth policies of the Sri Lankan government.
Sri Lanka’s state owned Daily News has stated that 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.
These were highlighted in the Central Bank of Sri Lanka (CBSL) report on “Recent Economic Developments: Highlights of 2020 and Prospects for 2021”.
The news report has stated that the subdued demand conditions and well anchored inflation expectations helped maintain inflation broadly within the target range of 4-6% thus far during 2020, although a transitory acceleration was observed due to the rise in food prices.
Inflation is expected to be maintained in this range over the medium term with appropriate policy measures, within the flexible inflation targeting framework of the Central Bank, the report notes.
As per the provisional estimates of the Department of Census and Statistics, the Sri Lankan economy contracted by 1.6%, year-on-year, during the first quarter of 2020 reflecting the combined impact of disruptions caused by COVID-19 related lockdowns, subdued global demand amidst the pandemic, and adverse weather conditions.
According to the report, despite the immediate impact of the pandemic on the services sector, it recorded a moderate growth of 3.1% in the first quarter of 2020, in comparison to a growth of 3.7% recorded in the corresponding period of 2019.
Sri Lanka’s economy has shown great resilience through the years. Even after facing a three decade long war, Sri Lanka’s economy has shown a buoyant growth. Even amidst the global Covid 19 pandemic, Sri Lanka’s economy has managed to show signs of picking up with sectors like exports, agriculture, ICT and digital infrastructure development showing growth and posing potential business/investment opportunities. Sri Lanka’s geographical positioning in the Indian Ocean, ease of doing business environment and the many trade agreements as well as trade concessions enjoyed by the country have made it a business hub in the South Asian region.
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