Sri Lanka growth expected to recover to 4 – 4.5-pct in 2019: CB Gov

Nov 15, 2018 (LBO) – There are some positive signs with FDI and exports probably going to be record numbers this year and we envisage Sri Lanka’s growth to be somewhere between 4 -4.5 percent for 2019, the Central Bank Governor said.

Growth is expected to remain below envisaged levels in 2018. As per the available economic indicators, real GDP growth is likely to remain subdued, Governor Indrajit Coomaraswamy said.

“However, Sri Lanka’s economy could accelerate to over 4.0 to 4.5 percent in 2019, from an expected 3.6 percent in 2018,” he said.

The Central Bank says that a significant output gap remained in the economy that called for loosening monetary policy.

It is essential to implement growth enhancing structural reforms within a coherent and transparent framework to accelerate growth on a sustainable basis, rather than relying on unsustainable short term monetary and fiscal stimulus, which leads to overheating of the economy.

The Governor notes that business confidence has been low from the time of the Local Government elections, there has been some uncertainty in the system.

“This could be a reason as to why growth has not been as high as we hoped it would be. But there are some positive signs.”

One of the big boosts to growth is when you have a large hydro growth, he said.

“Not only does it save foreign exchange but it’s a very high value addition activity.”

The Monetary Board yesterday decided to increase the Standing Deposit Facility Rate (SDFR) of the Central Bank by 75 basis points to 8 percent and the Standing Lending Facility Rate (SLFR) of the Central Bank by 50 basis points to 9 percent.

The Board said it arrived at this decision following a careful analysis of current and expected developments in the domestic and global economy and the domestic financial market, with the broad aim of stabilizing inflation at mid-single-digit levels in the medium term to enable the economy to reach its potential.

The move was done with the aim of injecting 90 billion rupees into the market to spur growth and shrink the output gap, the Governor noted.