The contraction is the most important within the crisis-hit island nation’s 75 years of independence.
Sri Lanka’s crisis-hit economic system shrank by a document 7.8 % final yr, official information exhibits, because the nation struggles with its worst monetary disaster in seven many years.
The island’s fourth-quarter gross home product (GDP) contracted by 12.4 %, in line with figures launched by the state-run census and statistics division on Thursday.
Sri Lanka’s progress is anticipated to shrink by 3 % this yr, Moody’s Buyers Service stated on Monday however progress is anticipated to rebound in 2024.
An unprecedented financial disaster sparked enormous protests within the island nation, culminating final July when a mob stormed the house of then-President Gotabaya Rajapaksa, forcing him to flee the nation and resign.
Since then, a brand new authorities has labored to restore Sri Lanka’s battered public funds and safe a sorely wanted Worldwide Financial Fund. (IMF) bailout,
Final yr’s contraction – the most important within the nation’s 75 years of independence – in contrast with 3.5 % progress in 2021 and a 4.6 % contraction in 2020 because the coronavirus pandemic hit.
It was “brought on by the deepening of the financial disaster … frequent energy disruptions, shortages in gasoline, uncooked supplies, (and) international foreign money”, the census and statistics division stated in a press release.
The information confirmed some enchancment in Sri Lanka’s fiscal place with inflation moderating to about 50 % in February, down from a document excessive of 69.8 % in September.
President Ranil Wickremesinghe has raised taxes and ended beneficiant subsidies on gasoline and electrical energy to spice up authorities income after his predecessor defaulted on Sri Lanka’s $46bn international debt final yr.
The reforms are a precondition of a $2.9bn rescue package deal from the IMF, which Sri Lanka expects to finalize subsequent week.
However the tax and value hikes have been roundly unpopular, triggering protests and industrial stoppages across the nation.
About 40 commerce unions warned on Thursday they deliberate a basic strike subsequent week if their calls for for concessions on the austerity program weren’t met.
Sri Lanka goals to announce a debt-structuring technique in April and step up talks with industrial collectors forward of an IMF evaluation of a bailout package deal in six months, its central financial institution governor stated final week.
Wickremesinghe has stated Sri Lanka can count on to stay bankrupt till a minimum of 2026 and insisted his authorities has no choice however to implement the reforms demanded by the IMF.
The census and statistics division stated the agriculture sector shrank 4.6 % final yr, whereas industries contracted 16 %, and providers dropped 2 % from a yr earlier.
Sri Lanka’s economic system shrank 11.8 % within the July-September quarter from a yr in the past, the second-worst quarterly contraction ever for the nation.
“These numbers are broadly according to expectations. Within the final three months of 2022, Sri Lanka was hit by very excessive inflation, gasoline shortages and excessive rates of interest,” stated Sanjeewa Fernando, senior vp of analysis at Asia Securities.
“For the remainder of this yr, with IMF funds anticipated, the central financial institution ought to have the ability to hold the foreign money strengthened, ultimately cut back rates of interest, and proceed to see inflation ease.”
