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Sri Lanka Projected to Achieve 3.5% to 5% GDP Growth in 2024: Standard Chartered Bank

July 11, Colombo (LNW):Sri Lanka is likely to achieve real GDP growth between 3.5% to 5% in 2024 if the current reform process continues, according to Standard Chartered Bank Global Research in their Credit Alert titled “Sri Lanka – Light at the End of the Tunnel.”

The report forecasts real GDP growth at 3% in 2024 and between 3.5% to 4% from 2025 to 2027, resulting in cumulative real GDP growth of 14% over the period from 2024 to 2027. The bank assigns an 80% probability that cumulative GDP growth will exceed the baseline of 11.1%.

Achieving an average nominal GDP of USD 100 billion over 2025-27 and 11.1% cumulative real growth from 2024-27 is likely highly correlated. The report adjusts the probability of the ‘Upside #1’ scenario to 8.75%, leaving a 1.25% probability that the nominal GDP target of USD 100 billion is met but real GDP growth is less than 11.1%.

The exchange rate, specifically USD-LKR, remains a key variable for nominal GDP in USD terms. The report expects gradual and modest LKR depreciation versus the USD, projecting USD-LKR at 390 by the end of 2027. This projection places 2024 GDP in the USD 89-91 billion range and nominal GDP above USD 96 billion by the end of 2027. The report assigns a 75% probability of average 2025-27 nominal GDP exceeding USD 92 billion.

On July 3, Sri Lankan authorities and the ‘steering committee’ comprising 10 major bondholders reached an agreement on the core financial terms of restructuring the International Sovereign Bonds (ISBs). The agreed terms, which broadly follow the bondholders’ April proposal, include key differences such as downward adjustments to the coupon and changes in principal reinstatement, narrowing the range of recovery values across the six restructuring scenarios.

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