May 17, 2019 (LBO) – Sri Lanka’s economic growth is projected to recover to 3.6 percent in 2019, and gradually reach 5 percent over the medium-term, with inflation in the mid-single digits, the IMF staff appraisal revealed.
Inflation is expected to rise to 4.5 percent by end-2019, as economic activity recovers and food prices stabilize, following weather-related supply disruptions in 2018.
“The economy is expected to recover gradually in 2019,” the IMF staff report said.
“Nevertheless, important downside risks remain, stemming from a tightening of global financial conditions and weaker external demand, as well as domestic uncertainty after the recent terrorist attacks and in the run up to the elections.”
The current account deficit is projected to narrow to 2.8 percent of GDP in 2019, driven by export growth, supported by the exchange rate correction and recently-signed free trade agreements, and lower oil prices.
Sri Lanka requested a one-year extension of the EFF arrangement, with rephasing of purchases, to allow more time for the completion of the economic reform agenda and provide a strong policy anchor in the run up to the presidential and parliamentary elections in late 2019 and mid-2020.