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2021 GDP forecast to be revised in two months

16 May 2021

  • Prevailing wave to disrupt economic growth

  • Bounced back ‘exceptionally’ well in 1Q’21

By Yakuta Dawood    Considering the unprecedented spread of the new wave in the country and the economic disruptions it has caused, the Central Bank of Sri Lanka (CBSL) is expected to revise the 6% growth projection it has set for 2021, The Sunday Morning Business reliably learns.  Speaking to us, CBSL Deputy Governor C.J.P. Siriwardana said that the current situation of Sri Lanka is being closely monitored, and the decision to revise the projected growth prediction will be made after observing the pattern for the next two to three months.  “A growth prediction revision will not happen at the moment. However, a decision would be taken after two to three months after closely monitoring the economic situation,” Siriwardana said.  Further commenting in this regard, he said CBSL is optimistic that the revision of growth projection will not be required, as the Government is trying its best to overcome the present Covid-19 situation at hand.  According to the 2021 Budget presented in November, the Government set a growth target of 5.5-6% after a GDP contraction of 3.9% in 2020. Meanwhile, responding to a query whether there would be a possibility of a growth contraction for the first and second quarter of 2021, Siriwardana said the first quarter of 2021 saw Sri Lankan bounce back exceptionally well amidst Covid-19 and other barriers faced by the economy.  “There will not be a negative growth contraction during the first quarter. The economy has recovered soon after the first wave of Covid-19, and we hope to maintain it during the second quarter, even though it could again depend on the situation of the country,” Siriwardana added.  Obtaining further information on this subject proved futile, as multiple attempts to contact CBSL Governor Prof. W. D. Lakshman failed.  However, speaking at the webinar organised by CBSL, titled “State of the Sri Lankan Economy, Challenges and Outlook as reflected in the Annual Report 2020”, Lakshman had said that the Annual Report was formulated before the third wave hit, during which time the economy was rapidly recovering. “We were doing the projection when the activities were normalising at a very fast rate. Predicted growth of the private sector was taking place rapidly, there were also prospects of export growth and global economic recovery faster than expected. Right now, everything has gone against our expectations,” Prof. Lakshman had said.  He had further said that the solution to the prevailing condition could be analysing the situation at hand in various different ways.  “But my concern, and the committee’s, is that both have to be done simultaneously. One cannot be abandoned for the sake of the other because there are issues of the survival of people’s lives and incomes. As a result, the economy has to be taken care of while looking after the people’s lives through the necessary health measures. It is unfortunate that there is a certain amount of differences of opinions in society as to how these can be combined, and I hope these will gradually pass away. I hope there will be consensus on how we should handle this third Covid-19 wave.” Lakshman, in conclusion, stated that the Government and Central Bank have deployed all possible tools to steer the Government through challenging and unfamiliar circumstances.

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