SL exits recession with 1.6% economic growth in 3Q

Sri Lanka, Dec. 16 — Sri Lanka has emerged from a nearly two-year recession that had impacted the economy and its people as the gross domestic product for the third quarter of 2023 recorded a 1.6 percent growth from the same period a year ago.

However, the full-year growth is still anticipated to be modestly negative.

As per the 2Q23 national accounts released by the Census and Statistics Department, the economy has officially emerged from the recession that began in the first quarter of the previous year.

The initial signs of a full-blown economic crisis emerged at that time, suggesting the potential for a prolonged downturn lasting for years.

Despite the significantly challenging policy measures implemented since then-ranging from historically high policy rate increases to debt repayment suspensions, tax hikes, import controls and market-based pricing for energy and utilities-Central Bank Governor Dr. Nandalal Weerasinghe stated in a public lecture yesterday that although painful for the public, these actions have played a crucial role in achieving stability much earlier than expected.

It is noteworthy that all the three major sectors of the economy- agriculture, industries and services- returned to growth in 2Q23, after multi-quarter contractions, specially in the case of the latter two, as agriculture returned to the positive territory from the fourth quarter last year.

During 3Q23, the agriculture sector registered a growth of 3.0 percent, industries 0.3 percent and services 1.3 percent. Taxes less subsidies grew by 13.6 percent after a 12.6 percent growth in the second quarter.

The contribution to the economy by each sector was at 7.8 percent, 28.1 percent, 57.5 percent and 6.5 percent, respectively.

Despite the third quarter turnaround, the economy is still projected to have contracted by 4.9 percent in the first nine months of 2023 compared to the same period last year.

This contraction, however, is more moderate than the 7.9 percent decline observed in the first half of the year.

The Sri Lankan economy reached its lowest point in the fourth quarter of the previous year, contracting by 12.4 percent. However, the pace of contraction slowed to 11.5 percent in the first quarter of this year and further to 3.1 percent in the second quarter.

This deceleration is attributed to the effectiveness of the policy measures implemented since last year, particularly in addressing inflation, which peaked at nearly 70 percent in September of the same year.

While the fourth quarter growth is anticipated to accelerate more than the third, the overall economy is still projected to experience a negative growth, due to the contraction in the first half. The Central Bank, however, has refrained from providing a specific number.

But the International Monetary Fund (IMF) has projected the Sri Lankan economy to decline by 3.6 percent in 2023.

Published by HT Digital Content Services with permission from Daily Mirror Sri Lanka.

Provided by SyndiGate Media Inc. (Syndigate.info).