Sri Lankan Economy
- Inflation: Sri Lanka’s Inflation rose to 8.6% in March 2017 from 8.2%in February 2017 as per the National Consumer Price Index. Main contributors to this rise are both food and non-food categories. The NCPI Core inflation, which reflects the underlying inflation in the economy decreased marginally to 7.0%. The Colombo CCPI for March indicated a rise from 7.3% to 6.8% however CCPI core inflation has risen to 5.3% from 5.0%.
- Industry: The manufacturing and service sector activities continue to improve in March, with a hike in service sector activity in comparison to other months as per the PMI. The IIP for February was relatively slower than January however YoY growth was up by 1.1%
- Tourism: Arrivals and earnings for March have reduced by 2.5% and 2.4% YoY respectively, however cumulative for arrivals and earnings Q1 figure is 3.4% higher than that of 2016.
- Foreign Reserves: The country’s reserves dropped almost 9% to USD 5.12 billion in March 2017. Foreign currency reserves dipped 11% to USD 4.16 billion and reserves in Gold were USD 0.89 billion.
- China: Economic growth for 2017 is projected to moderate at a rate of 6.5%. Q1 growth rate was 6.9% which was higher than Q1 of 2016. The government is optimistic of being able to stabilize the growth rate throughout the year. Growth is expected to rely more on internal demand and less on exports. PMI confirms the growth to be mainly influenced by the tertiary sector.
- South Asia: The World Bank has identified South Asia as a rapidly expanding region with potential for export-oriented growth. The region’s GDP is projected to rise to 6.8% growth rate in 2017 of which Sri Lanka’s growth projection is at 4.7% for 2017.
- USA: The Federal Reserve has raised interest rates a second time within three months, based on confidence about inflation prospects and accelerating the appreciation of the dollar rate as a result. Unemployment for the US has declined to 4.7%. Uncertainty related to trade concerns with China has subsided after the two heads of statement earlier in the month.
- Europe: Prime Minister May’s announcement for general elections has triggered an optimistic change in the UK market performance and the sterling has risen sharply to USD 1.2758 after more than six months. The EU countries do not see this as a positive impact for the elections taking place in France and Germany, as it will fuel the likelihood of the EU member countries opting out of the union. This uncertainty is affecting global markets.