Sri Lanka is likely to achieve a real GDP growth between 3.5% to 5% in 2024, if the current reform process is expected to continue, says Standard Chartered Bank Global Research in their Credit Alert titled ‘Sri Lanka – Light at the end of the Tunnel.”
“On real cumulative GDP growth from 2024-27, we see real GDP growth at 3% in 2024 and at 3.5 to 4% over 2025 to 2027 if the reform measures continue, which brings us to cumulative real GDP growth of 14% over 2024 to 2027.”
“Accordingly, we assign an 80% probability that cumulative GDP growth will exceed the baseline of 11.1%.”
Achieving average nominal GDP of USD 100 billion over 2025-27 and 11.1% cumulative real growth from 2024-27 is likely highly correlated.
‘‘We therefore adjust the probability of the ‘Upside #1’ scenario to 8.75%, which leaves the scenario where the nominal GDP target of USD 100 billion is met but real GDP growth is less than 11.1% at a probability of 1.25%,” the report said.
Commenting on the exchange rate the report says that USD-LKR remains a key variable for nominal GDP in USD terms. “We expect gradual and modest LKR depreciation versus the USD and project USD-LKR at 390 as of end-2027.
This brings us to our projection of 2024 GDP in the USD 89- 91 billion range and nominal GDP above USD 96bn as of end-2027.
“We therefore assign a high 75% probability of average 2025-27 nominal GDP being above USD 92 billion.”
On July 3, Sri Lanka’s authorities and the ‘steering committee’ comprising 10 major bondholders reached an agreement on the core financial terms of the restructuring of the International Sovereign Bonds (ISBs). Details of the agreed terms as well as the statement have been shared publicly.
The terms broadly follow the bondholders’ April proposal, with key differences including downward adjustments to the coupon and change in principal reinstatement, which narrows the range of recovery values across the six restructuring scenarios.
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