Asian Development Outlook increase Lanka’s GDP growth for 2024
The Asian Development Bank’s Development Outlook (AOD) report has revised Sri Lanka’s GDP growth for 2024 up to 2.6%. In the first quarter, industry expanded faster than anticipated alongside modest growth in services and agriculture.
Forward-looking indicators suggest continued robust growth in 2024 and beyond, supported by looser monetary policy, better public financial management, and progress in debt restructuring. Downside risks include a loss in reform momentum and delay in finalizing debt-relief agreements.
Sri Lanka’s Inflation remained muted in H1 2024 and is now forecast to be lower this year than projected in April. Following the value-added tax rate hike, the Colombo consumer price index edged up to 6.4% yoy in January before easing to 5.9% in February.
Monthly inflation has since remained at about 2.0% yoy, owing to substantially reduced utility prices following better hydropower generation, Sri Lankan rupee appreciation by 6.0% against the US dollar in H1 2024, and weak consumption demand despite cuts to the two policy rates of the Central Bank by 75 basis points each during January–July 2024.
The inflation forecast for 2025 remains unchanged, however, on the expectation of faster growth. Downside risks in Sri Lanka include delay in finalizing debt-relief agreements, unpredictable weather, and spillover from geopolitical tensions.
Forward-looking indicators show steady improvement thanks to loosening monetary policy, better public financial management, and negotiations to restructure external debt. Purchasing managers’ indexes for manufacturing, services, and construction remained in expansionary territory through most of H1 2024.
The index of industrial production rose by 7.3% in Q1 and 8.4% in April and May, though the index remains below 100, indicating decline from 2015. Based on these trends, growth projections for 2024 and 2025 are revised up from ADO April 2024.
Meanwhile the sub regional economic growth forecast is unchanged from ADO April 2024 for 2024 and slightly lower for 2025. The growth outlook for most countries in the sub region has either unchanged or improved since April.
Severe weather disturbances could also disrupt growth momentum across the sub region.
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