Sri Lanka expects to achieve 1% GDP growth in 2020 Minister Cabraal expresses optimism

By Sandun A Jayasekera

Sri Lanka expects to achieve a 1% GDP growth in 2020 despite the negative forecasts by certain global financial agencies and the downgrading of Sri Lanka’s credit rating by the Moody’s Investors Service, Money, Capital Markets and Public Enterprises Reforms Minister Ajith Nivard Cabraal said yesterday.   

“Sri Lanka, like many of its peers in the emerging market group, experienced initial capital outflows, exchange rate depreciation, slowdown in activity, and pressure on government finances, in response to the effects of COVID-19 pandemic,” he stressed.   

“Since May, merchandise exports have bounced back and by July had returned to pre-COVID monthly averages of US$ 1 billion. Sri Lanka has recognised the probable external sector pressure early and decisively curtailed non-essential imports in order to prioritise external debt service obligations. As a result of these positive and pragmatic economic fundamentals, Sri Lanka expects to increase her foreign reserves to US$ 8 billion,” Minister Cabraal emphasised.   

The savings on the import bill due to the curtailment of non-essential imports as well as the significant reduction in the fuel import bill  was expected to be over US$ 2 billion. Although inbound tourist movements were yet not possible, given the global pandemic situation, other services, exports, including IT service and shipping remained robust. Workers’ remittances had recorded a sharp increase in spite of the initial expectation of a slowdown. The expected finalisation of new legislation for the Port City within a month would result in the realisation of investment by those who had already completed due diligence on such investment. Other expected investments included import alternative industries as well as investments by international financial institutions, it is said.   

“The FDI inflows during 2020 are expected to be over US$ 750 million which is only about US$ 400 million in 2019. Debt to GDP ratio, which increased in recent years is expected to improve over the medium-term,” the minister said.

“With this positive outlook and pragmatic and timely economic fundamentals initiated by the government, it will not be a negative growth  this year. I hope that we will be in a position to achieve a minimum of 1% GDP growth with the hope of further strengthening it in 2021,” Minister Cabraal noted.