Tuesday, June 18, 2024

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IMF, WB and ADB forecast a dip in SL economic growth

The International Monetary Fund (IMF) is forecasting the economy of Sri Lanka to grow by 2.6% this year down from 3.6% in 2021.

This was the latest projection made by the IMF comparing to Asian Development Bank forcast of 2.4 percent GDP and Sri Lnka Central Bank 5.5 percent.

In its World Economic Outlook (WEO), a survey published twice a year, the IMF showed a projection of 2.7% for Sri Lanka’s real GDP growth.

The IMF has meanwhile urged Sri Lanka to tighten its monetary policy, raise tax and adopt flexible exchange rates to address its debt crisis.

The acting director of the IMF’s Asia and Pacific Department, Anne-Marie Gulde-Wolf said the requirement for fund lending will be progress toward debt sustainability.

She called on Sri Lanka for measures to increase tax revenues to address critical spending needs.

“Monetary policy has to be tightened to keep inflation in check,” she said, adding that there is a need for flexible exchange rates.

Sri Lanka is expected to record economic growth of 5.5 percent in 2022, with a recovery in its tourism sector, Sri Lanka’s Central Bank announced in January 2022 and it is still keeping mum on the economic growth.

It noted that Sri Lanka was going through a difficult time but had shown to be resilient even in the past and the 2021 growth rate was likely to be around “4.5 percent to 5.0 percent.

The Asian Development Bank’s (ADB) annual flagship economic publication forecasts a muted recovery from the coronavirus disease (COVID-19) pandemic as Sri Lanka’s economy grapples with macroeconomic challenges arising from high debt, low foreign reserves, and inflationary pressures. ADB forecasts Sri Lanka’s economic growth to dip to 2.4% in 2022 and improve marginally to 2.5% in 2023.

The Asian Development Outlook (ADO) 2022 observes that even as the Omicron variant of COVID-19 subsides, the country is facing several headwinds. Rising food, fuel, and commodity prices; higher import prices; supply chain disruptions; shortages stemming from the foreign exchange squeeze; demand side pressures; and exchange rate depreciation will drive inflation higher in 2022. Inflationary pressures are expected to moderate in 2023 as global prices fall and supply constraints ease

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