Business

Cabraal foresees 6% growth this year

  • Says rate not a challenge if exports perform well
  • Int’l rating agencies’ forecasts remain below 4%

By Imsha Iqbal

Despite a negative gross domestic product (GDP) growth in 2020 amidst a prevailing pandemic, Central Bank of Sri Lanka (CBSL) Governor Ajith Nivard Cabraal expressed the possibility of Sri Lanka reaching over 6% of GDP growth in 2021.

He made this remark during his speech at an event held in Jaffna last Saturday (20).

“Sri Lanka was growing at nearly 7% per annum from 2006 to 2014, after which we (Sri Lanka) hit a slow patch,” he further remarked.

According to World Bank (WB) data, Sri Lanka had been able to reach a GDP growth of 5% in 2015, and since then the GDP growth indicates a gradual decline towards a lower rate while a significantly negative GDP growth was reported last year.

The CBSL Governor further noted that it is not a challenge for Sri Lanka to reach such growth levels once again, while elaborating that the country must continue to leverage its capacity to perform in the export market.

When it comes to last year’s GDP growth, statistics provided by the WB indicates that it is  -3.56%.

In terms of the GDP growth in the first quarter (Q1) of this year, Sri Lanka has reported 4.3%, in accordance with statistics provided by the Department of Census and Statistics (DCS). At the same time, it was reported that in Q2 of 2020, the GDP growth was -1.8%.

CBSL data further shows that in Q2 of 2021, the country has been able to achieve a GDP growth of 12.3%.

However, the International Monetary Fund (IMF) revised Sri Lanka’s GDP growth in September from 4% to 3.6% due to the uncertainties that emerged with the rise in the Covid-19 cases during May-August while prolonging the third wave.

The report issued by the Fitch Ratings warned the results beyond a mere contraction in GDP growth, explaining that shock in GDP would possibly lead to “scarring” due to the lesser number of business investment as well as credit availability, bankruptcies overall, and losses in human capital in the labour market.

Moreover, ICRA Lanka too downgraded the GDP forecast for the year 2021 from 3.6% to 3.4%, with the anticipation that no major shock would consequently influence the Q3 and Q4 of 2021.