Sept 16, Colombo: The Asian Development Bank (ADB) forecasts Sri Lanka's economic growth to contract by 5.5 percent this year, the third worst performance within South Asia, as the country is recovering from the impact of the coronavirus pandemic on the livelihoods and businesses.
However, in the latest update of Asian Development Outlook (ADO), the ADB had given a better outlook for Sri Lanka for 2020 from the earlier projection in June update and a positive growth of 4.1 percent for 2021. June ADO Update forecasted the Lankan economy to contract by 6.1%.
As economic woes deepen with COVID-19 spread, Maldives and Sri Lanka, heavily dependent on tourism, will be among the hardest hit while overall growth of South Assis will shrink by 6.8 percent.
Maldives’ economy is estimated to contract by as much as 20.5%. Elsewhere in South Asia, India is to contract by 9%, Pakistan economy to contract by only 0.4% and Afghanistan by 5%. However, ADO forecasts the Bangladesh economy to grow by 5.2% in 2020 and that of Bhutan by 2.4% and Nepal by 2.4%.
In Sri Lanka, the forecast for 2020 GDP is revised from June Supplement to a reduced contraction of 5.5%. While the impact of the lockdown due to COVID-19 on economic activity during the second quarter of the year will be significant, a faster recovery than earlier anticipated in the second half of the year is expected.
Sri Lanka’s economy is showing stronger-than expected signs of recovery as the manufacturing purchasing managers’ index expanded for the second consecutive month to 64.6 in July, and that for services reached 51.4, the ADB noted.
In the near term, the government’s focus of boosting domestic production is likely to support employment and growth.
Meanwhile, a strong mandate for the President’s party in the general election in August is expected to enable the policy clarity needed to underpin growth.
From May to August, almost all major Asian currencies strengthened against the dollar, led by the Sri Lankan rupee with a 4.4% gain.