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Sri Lanka further sinks into recession as economy contracts 11.8% in 3Q
- Nine-month GDP shrinks 7.1% as economy braces for 8-9% decline by end of 2022
- All three economic sectors contract with industrial sector declining most
- Construction activities contract 33.2% reflecting industry plight
- Agriculture sector shrinks 8.7% as issues surrounding fertiliser continue to haunt sector
The Sri Lankan economy further sank into recession after its Gross Domestic Product (GDP) for the third quarter gave up as much as 11.8 percent of its output, bringing the nine-month contraction in the economy to 7.1 percent.
The third quarter GDP report may have come as a shock to those who believed that the worst might have been behind when the second quarter GDP recorded a negative growth of 8.4 percent amid runaway inflation, shortages of key commodities and fuel and rolling power cuts.
Even though a semblance of normalcy returned from August, red-hot inflation, tight monetary and fiscal policies, lingering dollar shortages—though somewhat eased—and import controls are continuing to weigh on the economy and its output.
As a result, all three key economic sectors shed value during the third quarter with the industrial sector declining the most by 21.2 percent amid shortage of commodities, import controls and dampened demand.
What could add to the woes of industrial activities in the ongoing fourth quarter output would be the slowdown in demand conditions in the international markets for the Sri Lankan made goods as the global economy led by the United States, Europe and China are set to either enter into brief and shallow recession or record slow growth as in the case of China.
Meanwhile, the construction sector, which accounts for a considerable share of industrial activities, came to a near standstill during the quarter recording a decline of 33.2 percent after the government suspended many infrastructure projects while the private sector either abandoned or paused their developments in view of the shocking run-up in costs.
There were reports that construction sector professionals including the engineers are exiting the country as the sector has lost opportunities while tough living conditions have forced scores of people out of the country looking for better opportunities.
The agriculture sector shed 8.7 percent of its value in the September quarter as issues surrounding fertiliser have continued to undermine sector progress.
Services activities contracted the least by 2.6 percent in the September quarter when the most resilient sectors for shocks in other times such as banking and financial services and telecommunication declined in the quarter in the face of the economic meltdown.
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