Economy grew slower in 2021 under rebased GDP

• SL first entered a recession in 2019 as economy contracted by 0.2% 
• Port City land reclamation work pushed 2016 and 2017 GDP substantially higher 
• IT and IT services added most value among all other economic activities under new base GDP 
• Macroeconomic indicators look a bit better under rebased GDP, yet at still worrying levels  

Sri Lanka’s economy grew at a slower pace of 3.3 percent in 2021, under the rebased gross domestic product (GDP) estimates, compared to 3.7 percent reported already under the previous base year of 2010. 

However, the GDP at current prices, re-estimated under the 2015 base year, rose by an average of 6.0 percent between 2015 and 2021 compared to the GDP under the 2010 base year, mainly due to the inclusion of the value addition came from the reclaimed land of the Colombo Port City project and the outsized role of the IT services. 
The Census and Statistics Department on Tuesday released the new GDP numbers rebased to 2015, from the hitherto used 2010, as part of its periodic rebasing exercise, to be in line with the international best practice and also to identify the emerging economic activities such as IT and IT-based services, which became more outsized in terms of their economic contribution in recent times. 

While the GDP growth rates for 2016 and 2017 were adjusted upwards under the rebased GDP estimates to 5.1 percent and 6.5 percent, respectively, from the previous 4.5 percent and 3.6 percent, as the majority of the Port City land reclamation took place in 2017, the growth faltered thereafter, resulting in a contraction in the economy in 2019, as the reclamation work reached its final stages. 

As a result, in 2018, the GDP growth fell to 2.3 percent, from 3.3 percent recorded previously before entering a recession in the following year, with a contraction of 0.2 percent in 2019, compounded by the slowdown in economic activities, as a result of the Easter Sunday attacks. 

 Earlier, the 2019 economic growth was reported at 2.3 percent, under the old base. 
As a result, Sri Lanka’s economy had contracted for two consecutive years, in 2019 and 2020, in the latter year by 3.5 percent, under the new base estimate, compared to the 3.6 percent contraction under the old base.   

Meanwhile, under the new base year, the gross value addition (GVA) of information and communication technology activities recorded a massive expansion, reflecting its larger role in the economy, as its GVA expanded by 169.3 percent compared to the existing GVA of the sector. 

As a result of the rebasing, many other macroeconomic aggregates also got updated. The rebasing in fact had a positive impact on the per capita income, government debt as a percentage of GDP and budget deficit as a percentage of the GDP. 

For instance, the per capita gross national income for 2021, under the new base, rose to US $ 3,921, from the previously recorded US $ 3,722, under the old base. 

Meanwhile, the government debt as a percentage declined to 99.5 percent, from the 104.6 percent recorded under the old base. 

Further, the budget deficit measured as a percentage of the GDP contracted slightly to 11.6 percent under the new base, compared to 12.2 percent.