COLOMBO: Sri Lanka’s economy grew 4.7% year-on-year from April to June this year, official data showed on Friday, as the island nation made progress in emerging from its worst financial crisis in decades.
Sri Lanka’s agriculture sector grew 1.7% from a year earlier, industrial output expanded by 10.9%, and services grew by 2.5%, Sri Lanka’s Census and Statistics Department said in a statement.
Lower power and fuel prices, reduced import restrictions, improved tourism and remittances earnings all contributed to a strong rebound, it added.
Struck by a severe dollar shortfall, Sri Lanka’s economy went into freefall in 2022, contracting 7.3% as it grappled with soaring inflation, a sharply weaker currency and a historic foreign debt default.
The economy has been recovering after securing a $2.9 billion bailout from the International Monetary Fund in March last year and is on track to reach a 3% growth target after a gap of two years, analysts said.
Sri Lanka’s key inflation rate falls to 0.5% in August
“This is in-line with expectations, but the third quarter might be difficult because we are seeing almost zero business activity due to the presidential election,” said Dimantha Mathew, head of research at First Capital.
“We might see growth at the 1%-2% range in 3Q, but we still think we will hit 3% growth for the full year.”
Sri Lanka will hold a presidential election on Sept. 21, with the winner tasked with implementing tough reforms needed under the IMF programme, including higher taxes and revamping loss-making state companies.
Public revenue is also expected to get a boost from the removal of vehicle import restrictions from February 2025, after reserves reached $5.95 billion at the end of August.
The cabinet also approved reducing direct taxes on income at a meeting on Friday, which will be included in an interim budget to be presented to parliament in November, helping boost public spending.
Sri Lanka’s central bank has slashed policy rates by 750 basis points since June 2023 taking advantage of declining inflation, which hit 0.5% at the end of last month.
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