Sri Lankan Economy
- According to the latest export figures, Sri Lanka’s exports dipped by 11.2% year-on-year in March. Exports in the first quarter of the year were 5.4% lower than the same period last year. Exports continued on an average declining trend for the past 18 months.
- Agricultural exports in Q1 grew marginally month-on-month, but are lower than the same period last year
- Textiles and garments, and food beverages, tobacco exports saw gains, while rubber and tea saw declines
- Imports in Q1 were lower than the same period last year, with declines in consumer and intermediate goods. Investment goods, meanwhile, increased driven mostly by machinery and building materials which is a positive indication of new projects coming on stream.
- Private sector credit growth has remained high and steady, with data for April showing it at 28.1%
- Inflation is continuing its steady uptick, hitting 6% in June. This will be a key indicator to watch for, especially given the inflation targeting framework of the IMF programme for Sri Lanka.
- Moody’s downgrading of the outlook on Sri Lanka to negative indicates its medium-term skepticism of Sri Lanka being able to successfully executive the IMF reform programme. The fiscal weaknesses of the country have continued to be a key concern expressed by ratings agencies
- Meanwhile, Sri Lanka managed to raise $1.5 billion in sovereign debt in its first ever dual tranche issue (10 year and 5.5 year). The issue was oversubscribed, with an order book of US$ 6.6 billion, and appealed to yield-hungry investors
- The IMF marked down its forecasts for 2016 global growth by 0.1 percentage points to 3.1% and 2017 growth to 3.4%
- Resulting from Brexit’s negative impact on the UK economy, the IMF estimated that growth would be 1.3% in 2017, which is 0.9% lower than in its last estimate (in April)
- With the US elections looming, and fears of a Trump presidency that imposes protectionist measures on imports to the US, Nomura Bank estimates that Asia will be the second worst hit region as a result