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Sri Lanka’s economic growth expected to increase from next year

Sri Lanka’s economic growth expected to increase from next year

Despite a drop in Sri Lanka’s growth from 3.7% in the first quarter of 2019 to 1.6% in the second quarter, after bomb attacks in April 2019 severely hit tourism and disrupted the economy, a recent presidential election is expected to improve political stability and aid economic recovery, Asian Development Outlook Supplement December 2019 has stated.
The report has also stated that the South Asian GDP growth forecast for 2019 is cut from 6.2% to 5.1%, and for 2020 from 6.7% to 6.1%.
These revisions reflect lowered growth projections for India at 5.1% in fiscal year 2019 (FY 2019, ending March 30, 2020) and 6.5% in FY 2020, the report has further stated.
Meanwhile, growth in India is expected to slow to 5.1% in 2019 as the foundering of a major nonbanking financial company in 2018 led to a rise in risk aversion in the financial sector and a credit crunch.
Consumption has also been affected by slow job growth and rural distress aggravated by poor harvest. Policy support will help growth recover to 6.5% in 2020.
Having already slowed year on year from 5.8% in the fourth quarter of 2018 to 5.0% in the first quarter of 2019, growth in India has fallen further to 4.5% in the second quarter, the lowest quarterly rate since the fourth quarter of 2012. This has put growth in the first half of FY 2019 at 4.8% as expansion in private consumption slowed to 4.1% and in investment to 2.5%.
The Asian Development Bank (ADB) now expects gross domestic product (GDP) in the region to expand 5.2% in both 2019 and 2020, down from the September forecast of 5.4% growth this year and 5.5% next year.

OSL take:

The increase in economic activity in Sri Lanka following the incentives offered by the government of Sri Lanka will push economic growth to higher levels next year. This and the business conducive environment in the country will attract foreign businesses/investors to explore opportunities in Sri Lanka. Given Sri Lanka’s geographical positioning in the Indian Ocean, the ease of doing business environment in the country and the many trade agreements as well as trade concessions enjoyed by the country have made it an attractive business destination in the South Asian region.

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Article Code : VBS/AT/23122019/Z_4

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