Sri Lanka’s economy to shrink by 2% in 2023: Central bank
Posted on April 27th, 2023

Courtesy CNA

NEW DELHI: Sri Lanka’s economy is expected to shrink by 2 per cent in 2023, its central bank said in an annual report on Thursday (Apr 27), as the country struggled to emerge from its worst financial crisis in decades.

The central bank projected Sri Lanka’s economy would grow by 3.3 per cent in 2024, according to the report.

The economy shrank by 7.8 per cent in 2022, in a year dominated by deep political instability, soaring inflation and steep currency depreciation as Sri Lanka struggled with a financial crisis triggered by record low foreign exchange reserves.

The central bank’s growth estimate for 2023 is more optimistic than the 3.1 per cent contraction projected by the International Monetary Fund (IMF), which finalised a nearly US$3 billion bailout to the crisis-hit country last month. The World Bank estimates Sri Lanka’s economy will contract by 4.3 per cent in 2023.

“Sri Lanka’s economy has been gradually stabilising since mid-2022. The long fuel lines, severe shortages, and high inflation have gradually reversed,” said Udeeshan Jonas chief strategist at CAL Group.

“Recovery from sectors such as tourism could be better than expected and consumer demand is also picking up. That together with the low base could see better performance.”

Sri Lanka, which defaulted on its foreign debt a year ago, is currently negotiating its debt repayments with bondholders and bilateral creditors. The island expects to complete its debt restructuring process in time for the first IMF review in September.

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