Sri Lankan economy records positive growth for first time since crisis

Colombo [Sri Lanka], December 17 : Sri Lanka recorded positive growth for the first time in around two years since the massive economic crisis that gripped the island nation, Sri Lanka-based Daily Mirror reported.
The Sri Lankan Gross Domestic Product (GDP) for the third quarter of 2023 recorded a 1.6 per cent growth as compared to the same period a year ago, according to the Census and Statistics Department.
Although the cash-strapped economy managed to emerge out of a nearly two-year recession, full-year growth is still anticipated to be modestly negative, Daily Mirror reported.
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 in the first quarter of 2022, suggesting the potential for a prolonged downturn lasting for years.
Nandalal Weerasinghe, the Governor of Sri Lankan central bank, said that the significantly challenging policy measures--ranging from historically high policy rate increases to debt repayment suspensions, tax hikes, import controls and market-based pricing for energy and utilities--although painful for the public, have played a crucial role in achieving stability much earlier than expected, Daily Mirror reported.
Notably, all three major sectors of the economy--agriculture, industries and services--returned to growth in the second quarter after multi-quarter contractions, especially in the case of the latter two, as agriculture returned to positive territory from the fourth quarter last year.
During the third quarter, the agriculture sector registered growth of 3.0 per cent, industries 0.3 per cent and services 1.3 per cent. Taxes less subsidies grew by 13.6 per cent after a 12.6 per cent growth in the second quarter.
The contribution to the economy by each sector was 7.8 per cent, 28.1 per cent, 57.5 per cent and 6.5 per cent, respectively, the Daily Mirror reported.
However, despite the third-quarter turnaround, the economy is still projected to have contracted by 4.9 per cent in the first nine months of 2023 compared to the same period last year.
This contraction, however, is more moderate than the 7.9 per cent decline observed in the first half of the year.
Notably, the Sri Lankan economy reached its lowest point in the fourth quarter of the previous year, contracting by 12.4 per cent. However, the pace of contraction slowed to 11.5 per cent in the first quarter of this year and further to 3.1 per cent in the second quarter.
While the fourth quarter growth is anticipated to accelerate more than the third, the overall economy is still projected to experience negative growth due to the contraction in the first half. The Central Bank, however, has refrained from providing a specific number, according to Daily Mirror.
But the International Monetary Fund (IMF) has projected the Sri Lankan economy to decline by 3.6 per cent in 2023.
Its economy had shrunk for nine consecutive quarters since the third quarter of 2021. The country of 22 million people defaulted on its $46 billion external debt in April last year after running out of foreign exchange to finance imports of food, fuel, medicine and other essentials.
At the height of last year's economic crisis, civil unrest forced the ouster of then president Gotabaya Rajapaksa, when protesters stormed his residence.
His successor Ranil Wickremesinghe has doubled taxes, withdrawn generous energy subsidies and raised prices of essentials to shore up state revenue.