Economy contracts 1.6% in first quarter

• DCS cites inflation, foreign exchange devaluation and dollar deficit as key reasons 
• Both agriculture and industrial sectors record contractions; services record marginal growth 
• Chemical fertiliser and fuel shortages negatively impact agriculture and industrial sectors

Sri Lanka’s Gross Domestic Product (GDP) contracted by 1.6 percent in the first quarter of 2022 as the island nation’s economic activity slowed significantly despite the expectations of a recovery after two years of the pandemic in 2020 and 2021. The Department of the Census and Statistics (DCS) said the economic growth cratered due “factors such as inflation, foreign exchange devaluation and dollar deficit.”

It also said the chemical fertiliser shortage during the first quarter had a severe impact on agriculture and as a result rice production fell significantly. “Thus, the agricultural economy recorded the highest decline in this quarter since year 2015,” DCS said.   The industrial sector, according to DCS, was negatively impacted by the restrictions imposed on fuel imports.

DCS said as a result of the chemical fertiliser shortage, ‘growing of rice’ contracted 33.8 percent while ‘growing of tea shrank 15 percent. ‘Growing rubber’, ‘growing of cereals’, ‘growing of vegetables’ and ‘growing of fruits’ contracted 13.1 percent, 9.5 percent, 8.4 percent and 3.8 percent, respectively. 

 Meanwhile, all manufacturing activities have recorded contractions in 1Q22, and ‘manufacture of coke and refined petroleum product’ reported the highest contraction of 24.3 percent.

The highest contributors to the GDP in manufacturing sector, the ‘manufacture of food, beverages and tobacco products’ and the ‘manufacturing of textiles, wearing apparels and leather products’ also reported contractions of 9.1 percent and 0.9 percent respectively in this quarter. 

‘Construction industry’ which has the highest share of 9.3 percent to the GDP among the industry activities, and the ‘mining and quarrying’ activity recorded contractions of 2.2 percent and 1.5 percent, respectively, during the quarter under review.  

The marginal growth in the services sector was underpinned by “‘accommodation, food and beverage service activities’ (25.2 percent), ‘IT programming consultancy and related activities’ (12.3 percent), ‘telecommunication’ (7.9 percent), ‘real estate activities, including ‘ownership of dwelling’ (3.9 percent), ‘public administration and defense; compulsory social security’ (3.4 percent), ‘postal and courier activities’ (3.3 percent), ‘wholesale and retail trade’ (1.0 percent) and ‘education’ (0.6 percent),” DCS said.