GDP to grow by +1.9% YoY in 2024
The Sri Lankan economy continues to grow off a low base in 4Q 2023 with Gross Domestic Product (GDP) in 4Q2023 growing by +4.5% YoY (vs. -12.4% contraction in 4Q2022) says CT CLSA SECURITIES (PVT) LTD on their Gross Domestic Product report. GDP is forecast to grow by +1.9% YoY in 2024.
This was slightly above our expectations with the economy shifting 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 the highest growth being recorded in the Industries sector.
Growth was supported by easing interest rates after elevated inflation levels were brought to single digits. With the support of growth in the 2H2023 the contraction in economic activities slowed down with the GDP for 2023 reporting a contraction of -2.3% (vs. -7.8% in 2022).The industries sector reported the highest contraction during the period. Contraction in the sector was aggravated by a reduction of output from mining and quarrying, manufacturing textile and apparel, and construction activities during the period.
“With the CBSL’s growth prospects fueling the economy with precautious policy rate cuts aiding for expansion in the economy, we have revised up our GDP forecast to an expansion of +1.9% YoY (vs. +1.7% previously forecasted)”.
“Inflation levels at low single digits will support consumer disposable income to stabilize in the near term, with the reduction in electricity tariffs, further increase in public sector and private sector salaries ahead of the New Year season.”
Growth in industrial activities and services activities reported by PMI was commendable in recent months, primarily driven by seasonal demand, indicating growth in GDP in 1Q2024E. The report adds that 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 2024 year end.
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