CENTRAL BANK UPBEAT ON GROWTH

The current robust growth outcome recorded and domestic economic activity is likely to continue through the remainder of the year, Central Bank Governor Dr. Nandalal Weerasinghe told at the Monetary Policy review meeting yesterday.

The Governor said that based on the latest economic indicators he is forecasting a higher growth for 2024 than initially projected.

As per the GDP estimates published by the Department of Census and Statistics (DCS), the economy is estimated to have grown by 4.7% (year-on-year) in Q2 2024, following an expansion of 5.3% (year-on-year) recorded in Q1 2024. It was estimated at the beginning of the year that the economic growth rate would be around 3%, however since it has reached more than 4% in the second quarter an overall higher growth rate is expected by the end of the year, the Governor said. Latest projections confirm that headline inflation is likely to be below the target by a notable margin in the forthcoming months. Inflation softened significantly with the recent downward revisions to energy prices.

Supported by appropriate policy measures, inflation is expected to gradually align with the targeted level of 5% over the medium-term after a likely overshooting in the second half of 2025. Despite intermittent volatility, the Sri Lanka rupee appreciated against the US dollar by over 7% thus far during 2024, and the Central Bank purchased a significant amount of foreign exchange from the domestic market to bolster Gross Official Reserves (GOR).

GOR stood at US dollars 6.0 billion (including the swap facility from the People’s Bank of China) at the end August 2024.

The continuation of the Extended Fund Facility arrangement with the International Monetary Fund (IMF-EFF) and early finalisation of the debt restructuring process will support the strengthening of external sector buffers further. (SS)

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