• Says same measurement lapses could underestimate 2Q GDP estimates 
• Points out conventional data collection methods can’t capture new activities 
• Forecasts 1.7% economic contraction for this year 
• Statistics office maintains further delays can occur in releasing 2Q and 3Q GDP data

The disappointing first quarter gross domestic product (GDP) estimates were caused by large lapses in the measurement of the economic activities, as the lockdowns stymied data collection while the traditional collection methods were unequipped to capture the activities that went digital.  

Sri Lanka reported a surprise 1.6 percent contraction in GDP during the first quarter, although the economy was closed for roughly about two weeks in March, raising questions on the accuracy of the estimates of the economic output, compiled by the Department of Census and Statistics (DCS).

“National accounts estimates of the first quarter of 2020, published by the DCS, could entail large measurement errors, as data collection was affected by the lockdown, while the conventional data collection methods were unable to capture the new activities that emerged during the pandemic, such as work from home, door-to-door service delivery, etc.,” the Central Bank said in a new report, which examined how the economy fared up to mid-October and its prospects for 2021. 

In mid-October, the DCS bought time till December 15, to release the GDP data for both the second and third quarters but last week cited difficulties in meeting the deadline, amid new restrictions in place to control the resurgence of the virus and the current limitations of office-based staff.

The same measurement deficiencies, if allowed to continue, could greatly underwhelm the second quarter GDP estimates, in which period the economic output bottomed, due to broader lockdowns that remained for nearly half of the quarter, the Central Bank said. 

“These deficiencies are likely to underestimate GDP in the second quarter of 2020, to a great extent, resulting in a worse than actual statistical representation of the contraction, as the impact of the lockdown was larger during April and May 2020.” 

Meanwhile, the Central Bank forecasts the Sri Lankan economy to record a contraction of 1.7 percent this year, as the restrictions affecting the Western province, due to COVID-19 resurgence, could soften the recovery momentum.

The more conservative estimate compared to many others such as the International Monetary Fund and World Bank, came after a few months, since the Central Bank believed the Sri Lankan economy to at least avoid a contraction, let alone a growth this year. 

“The large-scale policy support provided by the Central Bank and government is expected to facilitate a fast recovery of economic activity in the near term, while the growth-oriented policies of the government are expected to sustain the recovery over the medium term,” the Central Bank noted.