Private credit loses momentum in April

• Largely due to virus related restrictions and partly to New Year holidays
• Private credit expands only by Rs.57.7bn in April, down from Rs.112.2bn in March
• CB recently revised full year private credit target to 12% from 14% citing virus-related restrictions

In what appears to be the beginning of a spell of poor economic readings, the credit consumed by the private sector lost momentum in April, largely due to virus related restrictions and partly to New Year holidays.

Private sector credit, one of the mostly watched indicators of economic dynamism expanded by Rs.57.7 billion in April, down from Rs.112.2 billion extended in March, when the economy was running at its full steam ahead of New Year holidays supported by bustling consumer and industrial activity.

The April deceleration also capped the two months of continuous acceleration in private sector credit in February and March, which brought the cumulative growth in such credit to nearly a quarter of the total Rs.850 billion envisaged for 2021. 

However, the Central Bank a fortnight ago said it would settle for a lower growth in private sector credit for 2021, which is Rs.750 billion or 12 percent, down from the 14 percent set at the beginning of the year, largely due to virus related restrictions and the resultant disruptions to economic activity. 

Slowdown in economic activity was also reflected in the deep contraction seen in manufacturing and the narrowing of service related activity in the economy.

Exports also lost momentum in April and textiles and garment exporters last week cautioned that they were losing business to their regional competitors as they were unable to operate at their capacity as factories are hamstrung by the lower labour turnout and other virus related restrictions.

Due to the endless coercion of healthcare officials, Sri Lanka chose to let its economy take the ultimate plunge to defeat the virus, which could lead to worse human, social and economic ramifications than what the virus would do to its people. 

Sri Lankan economy contracted by 3.6 percent last year.