The Central Bank of Sri Lanka today released its half yearly publication - “Recent Economic Developments: Highlights of 2018 and Prospects for 2019”. 

A summary of the performance of the Sri Lankan economy in 2018 as reflected in this publication is given below:

The Sri Lankan economy faced renewed challenges emanating from global market developments, which disrupted the steady stabilisation path observed up to the first quarter of the year. The economy grew at a moderate pace of 3.6 per cent in the first half of 2018, following relatively low growth of 3.3 per cent recorded during the year 2017. Agricultural activities continued their rebound in the first half of 2018 supported by favourable weather conditions that prevailed during this period. The growth in industrial activities slowed, mainly due to the subdued performance in the construction and mining and quarrying subsectors. The expansion in services activities was broad-based, driven mainly by the growth of financial services, wholesale and retail trade and other personal services activities. Meanwhile, an increase in the unemployment rate was observed during the first half of 2018. Consumer price inflation has remained subdued thus far in 2018, although temporarily edging up in some months, mainly as a result of movements in volatile food prices and upward adjustments to domestic petroleum and other administered price.

The Parliament on 26.10.2018 resolved under section 3 of the Active Liability Management Act of 2018 (ALMA) that “a sum not exceeding Rs. 310.0 billion may be raised by the Government of Sri Lanka (GOSL) by way of loans, in or outside Sri Lanka for such purposes as specified in the provisions of the Active Liability Management Act No 8 of 2018”.

Headline Inflation, as measured by the change in the National Consumer Price Index (NCPI, 2013=100), which is compiled by the Department of Census and Statistics (DCS), decreased to 0.9 per cent in September 2018, the lowest since January 2016, from 2.5 per cent in August 2018 on year-on-year basis. The deceleration in year-on-year inflation in September was driven by both the base effect and the monthly decline in Food prices. The change in the NCPI measured on an annual average basis decreased from 4.7 per cent in August 2018 to 4.0 per cent in September 2018.

The Manufacturing Sector PMI decreased to 54.1 index points in September 2018 from 58.2 index points recorded in August 2018. The slowdown observed in manufacturing activities in September was mainly driven by the slowdown in new orders and production, especially in manufacturing of food and beverages activities. Respondents highlighted that they had to increase their prices during the period due to increase in input cost of imported raw materials with rupee depreciation. This led to a decline in demand for their products, which in turn resulted in a decrease in new orders and production. However, new orders and production of manufacturing of textiles, wearing apparel, leather and other related products, which are mostly export oriented improved during this period. Overall employment and stock of purchases also slowed down. Meanwhile, lengthening of suppliers’ delivery time usually indicates that economy is booming with expanding activities in the short run. However, in this instance, lengthening of suppliers’ delivery time was due to manufacturers’ intentional increase of the lead time with the expectation of rupee stabilization. Thus, it does not indicate an expansion in economic activities. Overall, all the sub-indices of PMI recorded values above the neutral 50.0 threshold signalling an overall expansion in September yet at a slower pace compared to August.