Central Bank of Sri Lanka

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Sri Lanka Purchasing Managers’ Index (Manufacturing and Services) - October 2023

In October 2023, Purchasing Managers’ Indices indicated a softened contraction in Manufacturing activities and an expansion in Services activities.

Manufacturing PMI recorded an index value of 49.5 in October 2023, reaching towards the neutral threshold, during the month. Considering the sub-indices, New Orders and Stock of Purchases increased during the month, while Production and Employment remained contracted.

Services sector PMI recorded an index value of 56.2 in October 2023 indicating continued expansion in the services activities. This was led by the increases observed in New Businesses, Business Activities and Expectations for Activity. Nevertheless, Backlogs of Work and Employment contracted during the month.

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World Bank Approves $150 Million to Strengthen Sri Lanka’s Financial Sector Safety Net

The World Bank Executive Board approved US$ 150 Million under the Sri Lanka Financial Sector Safety Net Strengthening Project to strengthen the financial and institutional capacity of Sri Lanka’s financial sector safety net, with the focus on the Sri Lanka Deposit Insurance Scheme. The World Bank issued the following press release on 09 November 2023.

WASHINGTON, November 9, 2023—The World Bank’s Board of Executive Directors today approved $150 million in financing for Sri Lanka to strengthen the resilience of the financial sector.

CCPI based headline inflation edged up slightly in October 2023

Headline inflation, as measured by the year-on-year (Y-o-Y) change in the Colombo Consumer Price Index (CCPI, 2021=100)1 increased to 1.5% in October 2023 from 1.3% in September 2023. This slight increase in the headline inflation is mostly in line with the projections envisaged by the Central Bank of Sri Lanka (CBSL) in October 2023.

The Food deflation (Y-o-Y) continued for the fourth consecutive month and remained unchanged at 5.2% in October 2023 compared to the previous month. Meanwhile, the Non-Food inflation (Y-o-Y) increased to 4.9% in October 2023 from 4.7% in September 2023. Monthly change of CCPI recorded at -0.22% in October 2023 due to the combined effect of price decreases of -0.63% observed in the items of Food category and price increases of 0.41% recorded in the items of Non-Food category. The core inflation (Y-o-Y), which reflects the underlying inflation in the economy, decreased to 1.2% in October 2023 from 1.9% in September 2023.

Sri Lanka Purchasing Managers’ Index (Construction) - September 2023

Construction PMI recorded a Total Activity Index value of 44.3 in September 2023, indicating the continued contraction in constructon activities. In addition to the continuous decline in project work, the persistent rain that prevailed during the month dampened the progress of the available construction activities as well.

New Orders continued to decline, yet at a slower pace in September. Many respondents mentioned that although the tendering opportunities are gradually opening up, especially for some foreign-funded projects, the bid prices are highly competitive. Meanwhile, Employment remained contracted since most of the companies prefer to operate with the essential staff. Further, Quantity of Purchases declined during the month, in line with the decrease in construction work. In the meantime, Suppliers’ Delivery Time remained shortened during the month, mainly due to the lack of demand.

External Sector Performance – September 2023

Merchandise trade deficit widened in September 2023 due to the combined impact of relatively low export earnings and high import expenditure, compared to September 2022. The cumulative trade deficit during January to September 2023 continued to remain significantly low.

Workers’ remittances and earnings from tourism recorded significant improvements in September 2023, compared to the corresponding period of the previous year.

Tourist arrivals recorded over one million during the nine months of ending September 2023.

Foreign investments in the government securities market recorded a lower net outflow during September 2023, compared to the previous months.

Gross Official Reserves amounted to US dollars 3.5 billion by end September 2023.

The Sri Lanka rupee exhibited some volatility against the US dollar during the month of September 2023.

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