Rest of SA poised to move forward while Sri Lanka to languish

• Latest ADB report outlines dampened economic recovery prospects for SL while rest of SA on track for recovery
• SL’s economy projected to growat 3.4% in 2022, well below the 7% projection for SA region 
• Projects higher inflation due to impacts from removal of price controls, high global prices, and import disruptions
• Says low reserves have disrupted imports, and agriculture likely to be affected by chemical fertiliser ban 

While the rest of South Asian economies are on the track for recovery next year, the Asian Development Bank (ADB) in its latest report outlined dampened economic recovery prospects for Sri Lanka, amid the country’s deteriorated external position, marked by massive foreign debt obligations, continuing into the next year.
“Sri Lankan growth prospects for 2022 are dampened by macroeconomic headwinds as reserves have declined and significant external debt repayments are due in 2022. The fiscal deficit for 2021 is likely to be higher than budgeted. Economies elsewhere in South Asia look to be on track for previously projected recovery,” ADB stated in its Asian Development Outlook (ADO) 2021 Supplement titled ‘Recovery Continues,’ released this week.
The development lender maintained the growth forecast at 7 percent for South Asia, next year in the December update, while announcing it had downgraded the growth forecasts for Sri Lanka 
in 2022.
“Low reserves have disrupted imports, and agriculture is likely to be affected by a ban on chemical fertilisers. With these developments, growth forecasts are upgraded for 2021 but lowered for 2022,” the report noted.
Sri Lanka’s foreign exchange reserves fell to its lowest levels seen over a decade in November-end to US$ 1,587.0 million, providing only one month of import converge.
According to the September update of ADB  2021, Sri Lanka’s economy is projected to grow at the slowest pace in the South Asian region at 3.4 percent in 2022, well below the 7 percent projection for the region and 5.4 percent projection for Developing Asia.
However, ADB noted that the country’s economy grew by 12.3 percent in the second quarter of the this year, bringing growth in the first half of the year to 8 percent, surpassing earlier expectations with improvement in all sectors. 
The Department of Census and Statistics releasing the third quarter GDP data on Wednesday said Sri Lanka’s economy contracted by 1.5 percent, largely due to higher 
base effects.
Meanwhile, the ADB revised inflation forecasts for both 2021 and 2022 due to anticipated impacts from the removal of price controls, high global prices, and import disruptions despite the expected decline in global oil prices next year.
In September, ADB projected Sri Lanka’s inflation to increase by 5.1 percent in 2021 and 5.3 percent in 2022. The updated inflation projections for Sri Lanka are yet to be released.
The ADB revised inflation projection for South Asia from 5.8 percent to 5.9 percent in 2021 and from 5.1 percent to 5.3 percent  in 2022 on the expectation that global prices for food and other  commodities remain elevated and as domestic factors come into play in specific economies.

By contrast, the ADB revised down inflation forecast for Maldives as subsidies on staples and utilities keep domestic prices in check. 
The Inflation measured by the Colombo Consumer Price Index (CCPI) rose to 9.9 percent in the twelve months to November as the increase in food prices accelerated to 17.5 percent while non-food prices rose by 6.4 percent, amid supply side constraints and recovering demand. 
In 2020, Sri Lanka recorded the second largest increase  in food price inflation in Developing Asia at 10.6 percent 
after Pakistan.