CB hopeful of double-digit growth in 2Q despite lockdowns

• Says low base effects last year would support economy to return to positive territory
• Economy shrank whopping 16.4% in 2Q last year due to virus-related lockdowns

The Central Bank said it expects the economy to have recorded a double-digit growth during the second quarter ended in June, despite the virus-related restrictions took away much of its mojo, as the very low base effects during the same period last year would support the economy to return to positive territory this year.  

The Sri Lankan economy shrank by 16.4 percent in the April-June quarter, last year—recording its worst quarterly reading— plunging the economy towards a 3.6 percent decline last year, due to the virus-related lockdowns, which were harsher in nature and lasted long. 

The Central Bank remains sanguine over the economy’s ability to record a 5.0 percent expansion in 2021, due to the lower base effects, although some moderation is expected during the second half of the year, due to the virus spread. 

“In the second quarter, in spite of the disruptions, due to the third wave, we expect the growth to have been in the double-digit territory,” said Central Bank Economic Research Department Director Dr. Chandranath Amarasekara.
The Census and Statistics Department is yet to release the official second quarter gross domestic product (GDP) data. 

More sanguine expectations for the full-year growth is largely premised on the acclimatisation of most economic activities to the new normal and the ongoing rapid vaccination drive, albeit risks to such growth also exist depending on how long the ongoing restrictions would persist. 

While much of the economic activities, mostly conducted in-person in office settings, are now almost seamlessly happening remotely, segments designated as essential such as all export industries and their supply chains, agriculture, food and beverage manufacturing and the likes are functioning. 

However, a wide swath of the economy, represented by daily income earners, who require in-person engagement to carry out their livelihoods, has been unable to operate, which has made them even poorer.

 While the Central Bank is hopeful of around 5.0 percent growth in the economic output, most others have very conservative projections for the Sri Lankan economy, starting with the International Monetary Fund, which projected a 4.0 percent growth in 2021, before the latest round of lockdowns.

Sri Lankan economy was off to a solid start in the first quarter, with a 4.3 percent growth in GDP and was poised to record over 6.0 percent growth for the full year, before the virus-related restrictions were reimposed from mid-April, which later transcended into partial lockdowns.