Central Bank of Sri Lanka (CBSL) expects the economy to record continued growth in the second quarter of 2024 mainly driven by the healthy performances in industry and services, while growth will slow down in 2H24.
According to the Monetary Policy Report released last Thursday (15), CBSL said that based on available indicators, survey findings, and staff evaluations, the economy is expected to have recorded continued growth in Q2-2024 after recording 5.3% in Q1.
It said that healthy performances in industry and services activities mainly drove the growth.
“Nevertheless, it is noteworthy that the strong economic growth in 1H24 is partly supported by the low statistical base in the corresponding period of 2023 due to the continued contraction in economic activity witnessed for several quarters in the past,” CBSL said.
Accordingly, given that the year-on-year growth would be derived with reference to a relatively high statistical base due to the positive growth rates recorded in the second half of 2023, economic growth during 2H24 is expected to be lower than the growth in 1H24.
Earlier this month, at an event by CMA Sri Lanka, Central Bank Governor Dr. Nandalal Weerasinghe said that Sri Lanka will continue its positive economic growth momentum for the rest of 2024 achieving close to 4% growth by the end of the year as all indicators point towards a positive growth.
Further, the Monetary Policy Report said that the easing of monetary conditions is anticipated to aid in stimulating growth towards its potential by fostering investments, enhancing consumer spending and eventually boosting aggregate demand.
Meanwhile, the projected strengthening of economic conditions of key trading partners is anticipated to benefit the domestic economy via increased exports.
Additionally, it said that the external demand for domestic services, especially tourism, is expected to remain strong.
These conditions are expected to support the recovery of the economy, narrowing the negative output gap.
“However, due to continued fiscal consolidation efforts, the ability of the fiscal sector to promote economic activity remains limited. Accordingly, reducing the negative output gap on a sustainable basis remains challenging,” CBSL said.