By: Staff Writer
Colombo (LNW): “Perceptions about Sri Lanka’s economic climate continue to be under a cloud although there was some improvement in several economic indicators” LMD recent survey revealed.
“Despite the fact that many of Sri Lanka’s key economic indicators continue to improve – albeit gradually – perceptions in the nation’s corridors of business remain muted at best.”
The LMD magazine reports that “the percentage of business executives that believe the national economy will improve in the next 12 months increased by 4% to 17% in September.
Six months ago however, slightly over a third (34%) expressed confidence about the economic outlook.”
Less than a quarter (21%) expect the economy to remain the same (from 25% in August) while a pool of 62% polled that it would get worse – similar to the figure recorded in the preceding month, it notes.
A spokesperson for LMD also states: “One in three of those polled expects sales volumes in the next 12 months to get better, as was the case in August. But over a quarter feel that the numbers will remain the same, which is higher than the 22% recorded in August.”
According World Bank’s development update, Sri Lanka economy contracted by 7.8 percent in 2022 and 7.9 percent in the first half of 2023.
Construction, manufacturing, real estate, and financial services suffered the most amid shrinking private credit, shortages of inputs, and supply chain disruptions, worsening the negative welfare impacts of income contractions and job losses registered in 2022.
Headline inflation, measured by the Colombo Consumer Price Index, peaked at 69.8 percent in September 2022 and subsequently declined sharply to 4 percent in August 2023 and further decelerated significantly below the target to 1.3 per cent in September 2023, Central Bank data shows.
The decelerated inflation has been driven by declines in both food and non-food inflation from a high base amid subdued demand.
Decelerating inflation was beneficial for benefiting households’ welfare, and helping to limit further increases in food insecurity and malnutrition, especially among poor households.
The Central Bank of Sri Lanka has further reduced policy interest rates by 100 basis points, at the first monetary policy review by the Monetary Policy Board under the Central Bank of Sri Lanka Act, No. 16 of 2023 (CBA) ON Thursday 05 2023.
The deficit in the merchandise trade account widened in August to US $307 million compared to $ 260 million recorded in August 2022.
However, the cumulative deficit in the trade account during January to August 2023 narrowed to $2,964 million from $3,889 million recorded over the same period in 2022 due to a larger decline in imports off setting the decline in exports.
Sri Lanka’s official foreign reserves were estimated to have fallen to 3.5 billion US dollars in September, from 3.6 billion US dollars in August, the Central Bank said.
There were one-off factors including the bank covering short positions on Sri Lanka Development Bonds after they were repaid in rupees as well as a repayment of a swap with Bangladesh.
