Sri Lankan Economy
- Exports: Increased further in October 2017, registering a double digit growth of 14.1% on a Y-o-Y basis. This growth was mainly driven by industrial exports particularly from the increase in apparel exports to the US and the EU market. Both agricultural exports and mineral exports recorded a positive growth of 24% and 48% Y-o-Y respectively. According to the Ministry of Development Strategies and International Trade, full-year exports reached a high in 2017 rising to US$ 11.4 billion, an increase of 10% from 2016.
- Imports: Declined marginally in October 2017 mainly due to the decline in expenditure on sugar imports owing to lower prices as well as lower volumes. Fuel imports declined due to low crude oil imports in volumes despite an increase in prices. Import expenditure on consumer goods and intermediate goods rose by 1.3% and 5.5% respectively, while imports of investment goods decelerated by 12% Y-o-Y.
- Trade Balance: The cumulative trade deficit expanded moderately during the first ten months of 2017. With the improvement in financial flows, the Balance of Payment was a surplus of US$ 1.9 billion in the Jan-Oct 2017 period.
- Inflation: CCPI headline inflation eased to 7.1% in December 2017 (from 7.6% in November 2017) while CCPI core inflation eased to 4.3% Y-o-Y. Core inflation is at its lowest since October 2016. NCPI headline inflation eased to 7.3% (from 8.4% in November 2017) while NCPI core inflation decreased to 2.7%, the lowest the index has seen since it was compiled.
- Policy Rates: The Monetary Board of the Central Bank of Sri Lanka (CBSL) in their last policy review meeting in December 2017 decided to key policy rates unchanged.
- Road Map 2018: In this policy document released by the CBSL, a framework for Flexible Inflation Targeting (FIT) was announced with the intention of maintaining inflation at mid-single digit level. In order to implement the FIT framework, it would require amending the Monetary Law Act, continuation of the current fiscal consolidation, institutionalization of the required changes to the monetary and fiscal policy processes and creating awareness with the general public
- Sri Lanka- Singapore FTA: The two countries signed a FTA recently which aims to be more comprehensive in nature for Sri Lanka relative to past FTAs. Beyond the chapter on goods, there are chapters on services, investment, government procurement, economic and technological cooperation, e-commerce and intellectual property rights.
- Decline in Agriculture: The employed population in the agriculture sector as % of the total employed population in the country fell to 24.3% in 3Q 2017 which is all-time low.
- Global Growth: The World Bank raised its forecasts for 2018 to 3.1% as broad-based recovery was underway across the world. Advanced economies are expected to moderate slightly to 2.2% in 2018 while emerging economies are expected to grow by 4.5%.
US: With stronger private investments, the economy is estimated to have grown 2.3% in 2017 and accelerate to 2.5% in 2018.
China: Economy is expected to grow 6.8% in 2017 and will moderate to 6.4% in 2018 according to the World Bank
- Global Oil Prices: The OPEC reference basket averaged USD 62.06 per barrel in December 2017 which is its highest since June 2015 on the back of support for the on-going adjustment in supply and demand growth.
- PMI Up: The J.P. Morgan Global Manufacturing Purchasing Managers’ Index (PMI) rose to its best reading in December 2017, since February 2011 on robust gains in new orders, output and employment reflecting the expansion in the global manufacturing sector.