In spite of the International Monetary Fund (IMF) releasing bailout loans and the authorities working toward debt-restructuring efforts, economists sharply reduced Sri Lanka’s growth outlook for the remainder of the year due to import restrictions and still-limited reserves, according to the most recent economist survey conducted by Bloomberg.
According to Bloomberg News, the first-quarter economic decline is expected to more than quadruple, from 4.4% to 9.9%. Though at a lesser rate of 1% from an earlier forecast of 2.9, growth is expected to recover from the second quarter.
According to the poll, Sri Lanka’s estimated gross domestic product for the entire year was reduced from 2.7% to 0.7%.
The South Asian country endured its biggest economic crisis since gaining independence last year as a result of crop failures, acute food and fuel shortages, a lack of US dollars, declining reserves, and the infamous organic fertilizer policy. As the economy almost came to a complete halt and inflation skyrocketed, people turned to the streets to protest, eventually forcing a change in government.
Even if there are indicators of stability, such as the importation of food and gasoline and the IMF’s approval of a US$3 billion loan, some analysts claim that the current economic condition is still very different from what it was before the outbreak.
According to S&P Global economist Andrew Vogel, the situation is still unfavorable but is slanted in the right direction.
He continued by mentioning Sri Lanka’s scant foreign exchange reserves and severe import restrictions. Conditions are also uncertain because of a continuing embargo on payments for external debt until restructuring arrangements are reached.
The Bloomberg study revealed that the island nation’s double-digit inflation, which is the fastest in Asia, is anticipated to continue this year. Consumer prices were expected to soar to over 28.8% in the second quarter and average around 25% for the entire year, according to economists.
In addition, they predicted that the benchmark rates would rise by a total of 100 basis points in the second quarter. Before the relaxing cycle started, they anticipated that this would continue at least until the end of the third quarter.
In order to stimulate economy, the Central Bank of Sri Lanka has maintained its key rate at its highest level since August 2001, despite the fact that price increases remained persistently high in March at 50.3%. By the end of 2023, the monetary authority expects headline inflation to drop to single-digit levels.
