Sri Lankan Economy
- Exports: Earnings from exports registered a double digit growth (12.6% on a Y-o-Y basis) in September 2017, surpassing the USD 1bn mark of monthly exports for the third consecutive month. The growth was mainly led by higher earnings from the increase in textiles and garments exports as a result of improved garment exports to both the USA and EU market.
- Imports: Expenditure on imports increased by 10.5% Y-o-Y in September 2017, recording a double digit growth for the third consecutive month. This was as a result of higher expenditure incurred on intermediate goods, particularly on fuel due to the combined effect of high prices in the international market and higher volumes of fuel imported for thermal based power generation. The trade deficit as a result widened by 8% Y-o-Y in September 2017.
- Budget 2018: As announced in the budget statement, the government is aiming to increase tax revenue to 14.3% of GDP in 2018 (from an estimate of 13.5% in 2017) while reducing the budget deficit to 4.8% of GDP (from an estimate of 5.2% in 2017).
- Inflation: During October 2017, CCPI inflation increased to 7.8% (from 7.1%) while CCPI core inflation declined to 5.8% (from 6.0%). During the same period, NCPI inflation increased to 8.8% (from 8.6%) and NCPI core inflation decreased to 4.1% (from 4.6%). The reason for this uptick of headline inflation is from the rise in prices of food and beverages.
- Credit Growth: Credit to the private sector by commercial banks continued to moderate in September 2017 and recorded a 17.5% growth on Y-o-Y basis.
- Policy Rates: The Monetary Board of the Central Bank of Sri Lanka decided to keep key policy rates unchanged during their 7th policy review of 2017.
- Outlook Upgrade: Standard & Poor’s Global Ratings revised its outlook on Sri Lanka from ‘Negative’ to ‘Stable’ citing the strengthening of Sri Lanka’s institutions and governance practices while expecting the reform momentum to continue over the next 12 months.
- Oil Prices: As per OPEC’s monthly oil market report, the OPEC Reference basket averaged $55.50 per barrel in October 2017, gaining $2.06 over the previous month and reaching the highest value in more than two and a half years. The report stated that prices were supported by rising global demand and expectations that OPEC and other participating non-OPEC producing countries would extend the agreement to adjust output while help bring the oil market towards a rebalance.
- Trade: The global merchandise trade growth is expected to moderate during the fourth quarter of 2017, as per the recent update of the World Trade Outlook Indicator of the World Trade Organisation. The recent update is slightly lower than the forecast released in August 2017.
- Energy Outlook: As per the World Energy Outlook 2017 report of the International Energy Agency, over the next 25 years the world’s growing energy needs are to be met by renewable sources of energy supported by fast declining costs of clean energy technologies.
- Growth of China, US and EU
China: Economic growth during the third quarter of 2017 was recorded at 6.8%, topping the government target and accelerating for the first time in seven years.
US: During the third quarter of 2017, GDP expanded by 3% driven by business investment and consumer spending. This was the second straight quarter of growth above 2%, a pace that has persisted during the economic recovery.
EU: European Commission has forecasted a 2.2% growth in 2017 which is up from 1.8% in 2016. The previous forecast made in May 2017 was revised upward.