Return of normalcy expected to unleash burst of economic activity this year

• Says every high frequency data improved in 2020 second half, despite second COVID-19 wave in Oct.
• Expects SL to rejoin upper-middle-income club this year

Sri Lanka is expected to unleash a burst of economic activity this year, as the pandemic fades and the people and businesses are resuming activities that were put off last year, possibly elevating the country again into the upper-middle-income level, a status which was lost two years
ago in 2019.

According to the Central Bank, almost every high frequency data on the economy, such as industrial production, Purchasing Managers’ Index, credit to the private sector, power generation, paddy production, etc. improved in the second half of 2020, despite the second wave of COVID-19
in October.

Households are believed to be sitting on a significant pile of cash, which they stashed away last year and are waiting to splurge on activities such as travel and leisure, dining, throwing family reunion parties and shopping, which were prevented in 2020, due to the lockdowns. 

That is expected to fuel a substantial demand for goods and services, propelling a faster economic growth, as when money is spent, it energises a cycle of higher production and output, job creation and investments—a virtuous economic cycle of high income generation and
poverty alleviation.