Sri Lankan Economy
- Economic Growth: Sri Lanka’s Q2-2017 real GDP grew by just 4%, marginally up from 3.8% in Q1. Weak agricultural output, on account of an acute drought as well as floods, was the main contributor to this weak growth performance. The agriculture sector contracted sharply by 2.9% during Q2, meanwhile, industry and services sectors recorded robust growth of 5.2% and 4.5% (YoY) respectively.
- External Sector: Earnings from exports continuing its positive growth for the fifth consecutive month in July 2017. However the cumulative trade deficit widened in July 2017 as a result of the rise in import expenditure, partly attributed to weather related disruptions to power generation and food production.
- Inflation: In August 2017, both CCPI and CCPI core inflation increased to 6% from 4.8% and 4.9% in July respectively. The NCPI inflation increased to 7.9% (from 6.3%) and NCPI core inflation increased to 4.8% (from 4.2%).
- Credit Growth: Growth in credit extended to the private sector has shown a gradual deceleration since July 2016, responding to the prevailing high nominal and real interest rates in the domestic market.
- Interest Rates: At the latest Monetary Board meeting, the Central Bank decided to maintain the Standing Deposit Facility Rate (SDFR) and Standing Lending Facility Rate (SLFR) at their current levels of 7.25% and 8.75%, respectively.
The Global Economy
- Economic Growth: As per the latest report on the state of the economy by the Organisation for Economic and Cooperation and Development (OECD) observed that, “Economic performance is improving in most of the world’s leading economies but is still short of a self-sustaining upswing”. World growth should rise from a low of 3.1 per cent in 2016, to 3.5 per cent this year and 3.7 per cent in 2018, the OECD forecast, with the US, the Eurozone, Brazil and Russia contributing most to the improved global outlook.
- Global Oil Prices: Global oil prices moved higher for the second consecutive month in August, up about 6%, the highest monthly percentage gain for the year. Global crude oil prices improved on continued signs of market rebalancing and a further decline in US stocks.
- Trade: According to the latest report by the World Trade Organisation (WTO), global trade rebounded strongly in the first half of 2017, but cautioned that risks of protectionism loom large. The WTO expects 2017 trade to grow by 3.6%, well above last year’s 1.3 percent. This is a sharp upward revision of its earlier estimate in April, when it indicated growth of 2.4% and in a range of 1.8-3.6 percent, due to a high level of political and economic uncertainty.
- UK: According to the latest predictions of the OECD on the UK economic growth, the British economy will be the slowest growing in the in 2018 among G7 economies, after having been near the top of the table in 2016.
- China: OECD’s latest forecast for China’s growth rate is 6.8% in 2017 and 6.6% in 2018 has been higher by 0.2 percentage points in both years.