February 23, Colombo (LNW): In a recent media discussion on its Monetary Policy, the Central Bank expressed optimism regarding the ongoing rebound of domestic economic activity, anticipating its continuation throughout 2024. The bank emphasized the crucial role of appropriate policies in facilitating the gradual realization of the economy’s potential over the medium term.
The overall real GDP growth for 2023 is expected to show a moderate negative trend, indicating a milder contraction compared to the previous year. However, the Central Bank anticipates a return to positive economic growth in 2024.
A key factor influencing the economic outlook is the continuation of the IMF-EFF arrangement and the progress of envisaged structural reforms. The Central Bank highlighted that any disruption to this program could lead to high economic costs, including growth derailment, loss of confidence, and the prolongation of negative investor sentiments.
Sri Lanka achieved the significant milestone of reducing inflation to single-digit levels in 2023, restoring price stability from the elevated levels observed a year ago. The Central Bank’s projections indicate that headline inflation is expected to stabilize around the targeted level of 5% over the medium term.
The Central Bank acknowledged potential deviations from the inflation target in the near term, attributing them to recent tax amendments and supply-side disruptions. However, the bank believes that such deviations are unlikely to persist due to subdued demand conditions, as the economy is projected to operate below its full capacity for an extended period.
