The reduction is the greatest in the crisis-hit island nation’s 75 years of independence.
Sri Lanka’s crisis-hit economy shrank by a record 7.eight % final year, official information showed, as the nation grapples with its worst economic crisis in seven decades.
The island’s gross domestic item (GDP) fell 12.four % in the fourth quarter, according to information released Thursday by the state Division of Census and Statistics.
Sri Lanka’s development is anticipated to contract by three % this year, Moody’s Investors Service mentioned on Monday, but development is anticipated to rebound in 2024.
The unprecedented financial crisis sparked enormous protests in the island nation, culminating final July when mobs stormed the property of then-President Gotabaya Rajapaksa, forcing him to flee the nation and resign.
Considering that then, the new government has worked to repair Sri Lanka’s battered public finances and safe substantially-required help from the International Monetary Fund (IMF).
Final year’s decline – the greatest in the country’s 75 years of independence – compared with three.five % development in 2021 and a four.six % decline in 2020 when the coronavirus pandemic hit.
It was “triggered by the deepening of the financial crisis… frequent interruptions in the provide of electrical energy, shortages of fuel, raw supplies, (and) foreign exchange,” according to the statement of the Division of Census and Statistics.
The information showed some improvement in Sri Lanka’s fiscal position with inflation easing to about 50 % in February, down from a record 69.eight % in September.
President Ranil Wickremesinghe has raised taxes and scrapped generous fuel and electrical energy subsidies to increase government income soon after his predecessor paid off Sri Lanka’s $46 billion foreign debt final year.
The reforms are a prerequisite for a $two.9 billion help package from the IMF, which Sri Lanka expects to finalize subsequent week.
But the tax and price tag hikes have been rather unpopular, sparking protests and business shutdowns across the nation.
About 40 unions warned on Thursday that they have been preparing a common strike subsequent week if their demands for concessions below the austerity plan have been not met.
Sri Lanka aims to announce a debt restructuring technique in April and step up talks with industrial creditors ahead of a critique of the IMF help package in six months, its central bank governor mentioned final week.
Vickremesinghe mentioned Sri Lanka could count on to stay bankrupt till at least 2026 and insisted his government had no other choice but to implement reforms demanded by the IMF.
The Division of Census and Statistics mentioned that the agriculture sector fell by four.six % final year, when business fell by 16 % and solutions by two % compared to the earlier year.
Sri Lanka’s economy shrank 11.eight % in the July-September quarter from a year ago, the country’s second-worst quarterly contraction ever.
“These numbers are largely in line with expectations.” In the final 3 months of 2022, Sri Lanka has been hit by extremely higher inflation, fuel shortages and higher interest prices,” mentioned Sanjeeva Fernando, senior vice president of analysis at Asia Securities.
“For the rest of this year, with the anticipated IMF funds, the central bank should really be in a position to hold the currency sturdy, ultimately reduce interest prices and continue to see inflation.”