Unexpected COVID-19 cluster could somewhat affect near term growth momentum: CBSL

Oct 22, 2020 (LBO) – The Sri Lankan economy is expected to move along a faster recovery path, despite the latest surge in COVID-19 cases locally that could hamper near-term growth prospects, the Central Bank highlighted.

“The unexpected COVID-19 cluster that has emerged recently could somewhat affect this momentum in the near term, but the expeditious measures that are being taken by the Government to contain the spread could limit this impact,” the Central Bank said in its latest monetary policy review.

“The release of GDP estimates for the second quarter of 2020 by the Department of Census and Statistics has been delayed. It is likely that the second quarter of 2020 has recorded a greater contraction than in the first quarter, followed by a recovery in the third quarter of the year.”

However, as per the statistics office, the unemployment rate, which was estimated at 5.7 percent in the first quarter of 2020, has declined to 5.4 percent in the second quarter.

The depreciation of the Sri Lankan rupee against the US dollar is limited to 1.5 percent thus far during the year with the exchange rate remained stable. The Central Bank said it continued to purchase a sizeable volume of foreign exchange from the domestic market.

Gross official reserves were estimated at US dollars 6.7 billion at the end of September 2020, which provided an import cover of 4.6 months.

Meanwhile, the improvement in earnings from merchandise exports, restrictions imposed on the importation of non-essential goods and low crude oil prices helped narrow the trade deficit substantially during the nine months ending September 2020.

Services exports, excluding the tourism sector, continued to record a healthy growth led by computer and logistic services related activities. Workers’ remittances continued to record a notable acceleration since June 2020.