Business

Country records worst recession since Independence

Sri Lanka has recorded the worst recession in 2020 since it gained independence in 1948 with the GDP growth rate for last year recording a contraction of 3.6%, according to the annual report of the Central Bank of Sri Lanka (CBSL). 

In terms of the provisional national accounts estimates of the Department of Census and Statistics (DCS), the economy contracted by 3.6% in 2020, compared to the growth of 2.3% recorded in the preceding year.

The contraction in 2020 was driven by the year-on-year (YoY) contraction of 16.4% experienced during the second quarter of the year, due to the nationwide lockdown measures imposed to contain the Covid-19 outbreak, according to the report.

Nevertheless, the economy rebounded during the second half of the year, showing a real growth of 1.3% YoY, in spite of the disruptions caused during October-November with the second wave of the pandemic.

All sectors of the economy contracted during 2020 (agriculture, forestry, and fishing by 2.4%; industry by 6.9%; and services by 1.5 %), compared to the previous year. Activities contracted due to the disruptions caused by the pandemic. 

The taxes less subsidies of the GDP contracted by 8% in 2020, reflecting the impact of low tax revenue and increased production subsidies during the year. 

In nominal terms, the Sri Lankan economy was recorded to have contracted by 0.3% in 2020, compared to the expansion of 5.1% in the previous year. 

This, along with the depreciation of the Sri Lankan rupee, caused the economy to contract to $ 80.7 billion in 2020 from $ 84 billion in 2019. 

Also, per capita GDP declined to $ 3,682 in 2020 from $ 3,852 in 2019. On the expenditure front, final consumption expenditure recorded a growth of 2.1% in 2020 at current prices, in comparison to a growth of 7.4% in 2019. 

The growth of household consumption expenditure moderated to 1% in 2020 from 7.3% growth in the preceding year. 

Government consumption expenditure, however, grew by 9.8% in nominal terms during 2020, compared to the growth of 8.1% in 2019. 

Consequently, the share of consumption expenditure in GDP at current prices increased from 79.3% in 2019 to 81.1% in 2020.