Drought hampers Sri Lanka’s 1Q economic growth

Sri Lanka’s economy is estimated to have grown at 3.8 percent in the first quarter (1Q) of this year on an year-on-year (basis), decelerating from the 5.3 percent growth recorded for the previous quarter, as a result of the severe drought that prevailed in the country during the first three months of the year.
“Severe drought conditions that prevailed mainly in four provinces: Northern, Eastern, North-Central and North-Western from 2016 had an unfavourable impact, mainly on the agricultural activities of the country,” Department of Census and Statistics said in a communiqué.
The Gross Domestic Product (GDP) at constant (2010) prices for the 1Q recorded as Rs. 2,161 trillion compared to Rs. 2,082,544 million GDP reported for the first quarter of 2016.
The four major components of the economy—agriculture, industry, services and taxes less subsidies on products—have contributed their shares to the GDP at the current price by 7.0 percent, 30.8 percent, 52.3 percent and 9.9 percent respectively for the first quarter of 2017. 
In this quarter, the highest growth rate of 6.3 percent was reported for Industrial activities. Service activities reported a growth rate of 3.5 percent. 
Amidst unfavourable weather conditions, performance of agricultural activities further contracted and reported a negative growth rate of 3.2 percent.
Among the sub activities of agriculture, ‘growing of spices’, ‘animal production’, ‘ forestry and logging’ and ‘marine fishing’ reported high growth rates: 6.1 percent, 6.9 percent, 9.3 percent and 5.8 percent respectively.
In the meantime, the substantial declines in growth rates were reported for ‘growing of rice’, and ‘growing of oleaginous fruits’ by 53.1 percent, and 10.2 percent respectively in this quarter, due to the continuous drought prevailed through the respective growing areas of these crops.
During this quarter, the activities of ‘growing of tea’ and ‘growing of rubber’ reported negative growth rates of 5.7 percent, and 17.2 percent respectively. In the first quarter of 2017, the overall industry activities further expanded significantly, recording 6.3 percent growth rate. 
The ‘construction’ activity, which corresponds to the highest share of the GDP among the industrial activities, further increased by 16.1 percent during this quarter compared to the same quarter in 2016. 
In addition, significant growth rates were reported for sub activities of ‘water collection, treatment and supply’ ‘manufacture of other non-metallic and mineral production’, ‘manufacture of machinery and equipment’, and ‘mining and quarrying’, by 21.6 percent, 19.5 percent, 18.2 percent and 17.9 percent respectively, reinforcing the growth of the industry sector in the 1Q of 2017. 

During this quarter, the growth rate of ‘manufacture of textile and wearing apparel’ recovered the contraction reported in the 1Q of 2016, and recorded a positive growth rate of 0.6 percent. Meanwhile ‘manufacture of food, beverages and tobacco’ recorded a slight contraction of 0.3 percent within this quarter.
The service activities, which contribute the highest share of 52.3 percent to the overall GOP, grew by 3.5 percent during the first quarter of 2017, compared to the same quarter in the year 2016.
The performance of the service activities was buoyed by the sub activities of ‘Wholesale and retail trade’, ‘Transportation of goods and passengers including warehousing’, ‘Financial service activities’ and ‘Human health, residential care and social work activities’ which reported significant growth rates of 4.5 percent, 3.1 percent, 14.9 percent and 11.1 percent respectively compared to the corresponding quarter of 2016. ‘Other personal service activities’ reported a slight growth of 2.0 percent.