Sri Lanka likely to miss growth targets after Easter bombings

REUTERS: Sri Lanka is unlikely to hit its full-year economic growth target of 3-4 percent following the Easter Sunday bombings, junior finance minister Eran Wickremeratne told Reuters yesterday.

A Reuters poll of 10 analysts this month predicted growth could slide to 2.5 percent, which would be the country’s lowest since 2001.

Tourism, foreign investment and overall business activity are all expected to fall, the poll found, following the April 21 bombings in which more than 250 people including 42 foreigners were killed. Islamic State claimed responsibility.

Some analysts said they were expecting a contraction in growth in the second quarter.

But Wickremeratne said measures including increased government spending would soften the impact of falling investment and an estimated $1 billion slump in tourism revenue this year.
Last year the island earned US$ 4.38 billion from tourism. Arrivals tumbled 7.5 percent in April from a year ago.

“The early indication of the Central Bank says that it won’t be negative growth (in Q2),” Wickremeratne told Reuters in a phone interview yesterday.

“Obviously I don’t think we can achieve the (full-year) 3-4 percent range. But I will wait for the central bank’s latest estimates.”

Wickremeratne said the Central 
Bank reducing commercial banks’ Statutory Reserve Ratio in February, the government putting more money into construction, and a state-funded loan programme to boost economic activities in rural areas would all help to support growth.

“It is not typical private sector-led growth. But there will be growth because we are spending that money on the ground,” he said.

Growth slowed to a 17-year low of 3.2 percent in 2018, as a weeks-long political crisis and past policy tightening sapped business confidence and cooled investment.
The Central Bank had already said before last month’s attacks that interest rates could be reduced.