CT CLSA Securities revises GDP forecast to +1.7% in 2024

With the Central Bank’s growth prospects fueling economy with precautious policy rate cuts aiding for expansion in the economy, CT CLSA Securities (Pvt) Limited in their Economic update has revised up their GDP forecast to a contraction of -3.1% YoY (vs. -3.5% previously forecasted) in 2023E and a growth of +1.7% YoY (vs. +1.5% previously forecasted) in 2024 end.

Inflation levels at low single digits will support consumer disposable income to stabilize in the near term, although the VAT amendments will cause pressure to the inflation levels. Growth in industrial activities and services activities reported by PMI was commendable in recent months primarily driven by seasonal demand which indicates further growth in GDP in 4Q-2023E.

An increase in private consumption from falling interest rates, VAT hike will keep disposable income levels in check, and recovery in the manufacturing and services activities fueled by a recovery in industries and tourism will aid the growth in economic activities in 2024E.

The Sri Lankan economy rebounded for the first time following the economic crisis with Gross Domestic Product (GDP) in 3Q2023 growing by +1.6% (vs. -11.8% contractions in 3Q2022).

“This was in-line with our expectation as the economy shifts gears for a growth phase after the contractions recorded in the last few quarters.”

Growth was driven by expansion in activities in all three major economic sectors with highest growth being recorded in the Agriculture sector. Growth was supported by easing interest rates after elevated inflation levels were brought under control. All three sectors reported expansion in 3Q2023 with Agriculture, Industrial and Services sectors recording YoY growths of +3.0%, +0.3% and +1.3%, respectively YoY in 3Q2023.

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