Economy contracts 1.6% in first quarter

• Agricultural and industrial activities contract; service sector activities expand
• Statistics office says pandemic impacts would be severely felt in 2Q
• Construction sector activities record sharp contraction
• Services sector activities positively assisted by telecom, IT, retail and financial services 

Issuing the national accounts estimates for the first quarter of 2020 (1Q20), the Department of Census and Statistics (DCS) yesterday said Sri Lanka’s GDP contracted 1.6 percent compared to 3.7 percent growth recorded in the first quarter of 2019.

DCS in a statement said the national accounts estimates of 1Q20 reflected the “continuing negative effects of Easter Sunday attacks in April 2019 getting compounded by the deep impacts of the onset of COVID-19 pandemic, as it affected the peak output conditions usually experienced before the dawn of the Sinhala and Tamil New Year.”It also said the impacts of the pandemic would be felt much more in the second quarter 
of 2020.

1Q20 GDP estimates reported contraction in agriculture and industrial activities by 5.6 percent and 7.8 percent respectively. However, services sector activities continued to expand during the quarter under review by 3.1 percent.A quarter covers approximately 90 working days. But due to the curfew imposed to control the spread of coronavirus, hardly any activity was carried out in the last two weeks of 1Q20.According to DCS, the contraction of agricultural activities was mainly driven by underperformance of cultivation of tea, rubber, coconut and marine fishing and forestry & logging. However, growing of rice, vegetables, cereals, fruits, spices and animal production expanded during the quarter.

Industry sector activities shrunk during 1Q20 as the manufacturing industry experienced a contraction of 4.1 percent due to reduced export demand from the US and Europe for apparel, tea and rubber products. 

Also, the production disruptions due to curfew in the last two weeks of March and delays in acquisition of raw materials from China contributed to the contraction in the industry sector.
DCS said among industrial activities, construction sub activity, which accounts for a 6.4 percent share within the sector, recorded sharp 16 percent contraction in 1Q20, showing the massive negative impact of COVID-19 on that industry.

During 1Q20, the services sector stood out as the only sector to record a positive growth despite the pandemic. This was assisted by the sub activities of wholesale and retail trade, telecommunication, IT programming consultancy and related activities, financial services activities and other personal services.

However, accommodation, food and beverages activity, transportation of goods and passengers including warehousing reported contractions due to COVID-19 pandemic-induced economic malaise.

Meanwhile, DCS said publishing of national accounts estimates, which normally happens after the completion of 75 days in each quarter, was delayed due to challenges in gathering and verifying data from government, semi-government and private sector during the months of May and June due to pandemic-related difficulties.