COLOMBO: Sri Lanka’s market grew 4.7 per share year-on-year from April to June this year, official data showed on Friday, as the island country made progress in emerging from its worst economic crisis in years.
Sri Lanka’s agriculture sector grew 1.7 per cent from a year earlier, industrial output expanded by 10.9 per cent, and services grew by 2.5 per cent, 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 per cent as it grappled with soaring inflation, a sharply weaker currency and a historic foreign debt default.
According to analysts, the US economy has been recovering since receiving a$ 2.9 billion bailout from the International Monetary Fund in March of this year, and it is on track to reach its 3 % growth target after a two-year hiatus.
” 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 may see growth in the 1 to 2 percent range in 3Q, but we still believe we will experience 3 % growth for the entire year.”
The winner of the IMF program’s tough reforms, including higher taxes and revamping loss-making state corporations, will be in charge of Sri Lanka’s presidential election on September 21.
After reserves reached US$ 5.95 billion at the end of August, public revenue is anticipated to increase as a result of the removal of car import restrictions starting in February 2025.
At a meeting on Friday, the cabinet approved a lower direct income tax, which will be included in the interim budget to be presented to parliament in November, boosting 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 per cent at the end of last month.