Sri Lankan Economy
- Sri Lanka’s trade deficit narrowed by 11.7% in February (latest data), with imports declining faster than the decline in export earnings.
- Tourism earnings continued to buoy the external balances, averaging 22% growth during Q1 2016. Worker remittances ended the secular slide seen in 2015, with a pickup in Q1.
- Credit to the private sector continued its fast growth, and February growth at 26.5% was the fastest in 14 months. Meanwhile, CBSL policy action to hike rates was only seen once in Q1. Rates were held steady in the April Monetary Board meeting as well.
- Inflation ended its steady uptick seen over the past few months, and dipped to 4.5% in March.
- In the midst of substantial fiscal distress and negotiations on an IMF support package, the government backtracked on several tax proposals made in Budget 2016 announced last November. Several changes were made, and this update captures a summary.
- The country’s fisheries exports could get a boost of LKR 10 billion with the lifting of the EU fisheries export ban. Sri Lanka depends on the EU market for 20% of its fisheries exports. In 2015, total fisheries exports fell by 30% owing largely to the EU ban.
- IMF’s revised downward by 0.2 points its global growth forecast for 2016 to 3.2%, noting that “uncertainty has increased and risk of weaker growth scenarios are becoming more tangible”.
- The World Bank, meanwhile, is bullish on South Asia’s prospects in the face of turbulent international markets and remains the fastest growing region in the world. Growth for 2016 is forecast for 7.1%, and 7.3% in 2017. Yet, declining capital flows, slowdown in remittances from oil exporting countries are impacting growth.