The Sri Lankan economy expanded for the third consecutive quarter in Q1 2024, with a year-on-year real growth of 5.3%, said Governor Central Bank Dr. Nandalal Weerasinghe.
The latest economic indicators suggest that real GDP growth in Q2 2024 also has been robust. The rebound in domestic economic activity is expected to sustain, buoyed by the transmission of relaxed monetary policy to broader market interest rates, enhanced supply conditions, the gradual rebound in external demand conditions, revival of tourism and the dissipation of uncertainties surrounding debt restructuring. The economy, which operates below its full capacity presently, is forecast to reach its potential over the medium term horizon.
While the external current account is likely to have recorded a surplus in the first half of the year, the cumulative merchandise trade deficit widened during this period compared to the same period in 2023.
The Governor also said that though it does not come under the purview of the Central Bank, the government should continue with the reforms of the State owned enterprises which are eating in the coffers of the treasury. He also said that the government doing away with loss making SOE’s will help to improve the country’s international rating. Dr Weerasinghe said that they are also expecting to receive the fourth tranche of the IMF disbursement this year which will bring the total amount of assistance received by the IMF to over USD 1.3 billion.
Asked why the inflation increased marginally he said that a sustained acceleration is not anticipated. The latest projections suggest that headline inflation is likely to be notably below the target in the forthcoming months due to the combined impact of downward adjustments to electricity tariffs and domestic fuel prices and the favourable statistical base.
Meanwhile, the Sri Lanka rupee witnessed intermittent volatility against the US Dollar in recent months. Overall, the Sri Lanka rupee appreciated by over 6.5% against the US Dollar thus far during 2024.
