the sri lankan economy on a steady recovery path · note: trade deficit for august 2020 is...

The Sri Lankan Economyon a Steady Recovery Path

Economic Research Department

Central Bank of Sri Lanka

September 2020

Having contained the domestic spread of the COVID-19 pandemic, SRI LANKA is on a steady recovery path after the initial economic slowdown during the islandwide lockdown from mid-March to mid-May 2020…

2

Economic Research Department Central Bank of Sri Lanka

Sri Lanka has been one of the few success stories in combatting the spread of COVID-19…

3

Source: Johns Hopkins University

Source: Coronavirus (COVID-19) Sri Lanka - Analytics Dashboard, https://covid.iq.lk/; Epidemiology Unit (MOH)

Global Sri Lanka

Total Confirmed Cases 31,779,835 3,324

Deaths 975,104 13

Recovered 21,890,442 3,129

Active Cases 9,889,393 182


People’s movements have normalised ahead of neighbouring countries…4

Source : Google Mobility ReportsNote: Excludes weekends and Sri Lankan Holidays

-100

-80

-60

-40

-20

0

20

40

17-F

eb

29-F

eb

12-M

ar

24-M

ar

5-A

pr

17-A

pr

29-A

pr

11-M

ay

23-M

ay

4-J

un

16-J

un

28-J

un

10-J

ul

22-J

ul

3-A

ug

15-A

ug

27-A

ug

8-S

ep

% c

han

ge

fro

m b

ase

lin

e

Grocery and Pharmacy

-100

-80

-60

-40

-20

0

20

40

17-F

eb

29-F

eb

12-M

ar

24-M

ar

5-A

pr

17-A

pr

29-A

pr

11-M

ay

23-M

ay

4-J

un

16-J

un

28-J

un

10-J

ul

22-J

ul

3-A

ug

15-A

ug

27-A

ug

8-S

ep

% c

han

ge

fro

m b

ase

lin

e

Parks

-100

-80

-60

-40

-20

0

20

40

17-F

eb

29-F

eb

12-M

ar

24-M

ar

5-A

pr

17-A

pr

29-A

pr

11-M

ay

23-M

ay

4-J

un

16-J

un

28-J

un

10-J

ul

22-J

ul

3-A

ug

15-A

ug

27-A

ug

8-S

ep

% c

han

ge

fro

m b

ase

lin

e

Public Transport

-100

-80

-60

-40

-20

0

20

40

17-F

eb

29-F

eb

12-M

ar

24-M

ar

5-A

pr

17-A

pr

29-A

pr

11-M

ay

23-M

ay

4-J

un

16-J

un

28-J

un

10-J

ul

22-J

ul

3-A

ug

15-A

ug

27-A

ug

8-S

ep

% c

han

ge

fro

m b

ase

lin

e

Workplaces

-10

0

10

20

30

40

50

60

17-F

eb

29-F

eb

12-M

ar

24-M

ar

5-A

pr

17-A

pr

29-A

pr

11-M

ay

23-M

ay

4-J

un

16-J

un

28-J

un

10-J

ul

22-J

ul

3-A

ug

15-A

ug

27-A

ug

8-S

ep

% c

han

ge

fro

m b

ase

lin

e

Residential

-100

-80

-60

-40

-20

0

20

40

17-F

eb

29-F

eb

12-M

ar

24-M

ar

5-A

pr

17-A

pr

29-A

pr

11-M

ay

23-M

ay

4-J

un

16-J

un

28-J

un

10-J

ul

22-J

ul

3-A

ug

15-A

ug

27-A

ug

8-S

ep

% c

han

ge

fro

m b

ase

lin

e

Retail and Recreation

Sri Lanka India Bangladesh


0

20

40

60

80

100

120

140

160

180

1-Ja

n-2

020

15-J

an-2

020

29-J

an-2

020

12-F

eb

-20

20

26-F

eb

-20

20

11-M

ar-2

020

25-M

ar-2

020

8-A

pr-

2020

22-A

pr-

2020

6-M

ay-2

020

20-M

ay-2

020

3-Ju

n-2

020

17-J

un

-20

20

1-Ju

l-20

20

15-J

ul-

2020

29-J

ul-

2020

12-A

ug

-20

20

26-A

ug

-20

20

Nu

mb

er

of

veh

icle

s (‘

00

0)

Expressway Traffic

Traffic in Colombo-Katunayake Expressway Traffic in Southern Expressway

Source : Road Development Authority

Usage of expressways, particularly the Southern Expressway has also increased above pre-lockdown levels…

5


0

50

100

150

200

250

300

350

400

Jan

Feb

Mar

Ap

r

May

Jun

Jul

Au

g

Se

p

Oct

No

v

De

c

Mil

lio

n li

tre

s

CPC Petroleum Sales to Transport Sector

2019 2020

Source : Ceylon Petroleum Cooperation (CPC)

Petroleum sales to the transport sector have reached pre-COVID levels…6


1,000

1,050

1,100

1,150

1,200

1,250

1,300

1,350

1,400

1,450

1,500

Jan

Feb

Mar

Ap

r

May

Jun

Jul

Au

g

Se

p

Oct

No

v

De

c

GW

h

Electricity Generation

2019 2020 Source : Ceylon Electricity Board

Electricity generation is steadily normalising, with greater reliance on hydropower generation…

7


400

450

500

550

600

650

700

Jan

Feb

Mar

Ap

r

May

Jun

Jul

Au

g

Se

p

Oct

No

v

De

c

TE

Us'

00

0

Port Services – Container Handling

2019 2020

Source : Sri Lanka Ports Authority

In spite of the slowdown in global trade, activity at the Colombo port has increased…

8


0

5

10

15

20

25

30

35

40Ja

n

Feb

Mar

Ap

r

May

Jun

Jul

Au

g

Se

p

Oct

No

v

De

c

Nu

mb

er'

00

0

New Motor Vehicle Registrations

2019 2020

Source : Department of Motor Traffic

Even motor vehicle registrations hit previous year’s levels, in spite of restrictions on new imports…

9


0

200

400

600

800

1,000

1,200Ja

n

Feb

Mar

Ap

r

May

Jun

Jul

Au

g

Se

p

Oct

No

v

De

c

MT

' 00

0

Cement Availability

2019 2020

Source : Central Bank of Sri Lanka

Construction sector has gradually gathered pace…10


40

50

60

70

80

90

100

110

120

130Ja

n

Feb

Mar

Ap

r

May

Jun

Jul

Au

g

Se

p

Oct

No

v

De

c

Ind

ex

val

ue

Index of Industrial Production

2019 2020

Source : Department of Census and Statistics

Industrial production has rebounded…11


Purchasing managers indices display expansion in manufacturing activity…

12


10

20

30

40

50

60

70

80

Jan

Feb

Mar

Ap

r

May

Jun

Jul

Au

g

Se

p

Oct

No

v

De

c

Ind

ex

val

ue

Purchasing Managers Index for Manufacturing Activities

Manufacturing -2019 Manufacturing - 2020


…as well as services…13


20

25

30

35

40

45

50

55

60

65

Jan

Feb

Mar

Ap

r

May

Jun

Jul

Au

g

Se

p

Oct

No

v

De

c

Ind

ex

val

ue

Purchasing Managers Index for Services Activities

Services - 2019 Services - 2020


0

1

2

3

4

5

6

2017

2018

2019

2020

Mil

lio

n M

T

Paddy Production

Maha Yala


Following a bumper Maha harvest, a bumper Yala production of paddy is expected…

14

Note: Paddy production for 2020 Yala season is projected


10

15

20

25

30

35

40

Jan

Feb

Mar

Ap

r

May

Jun

Jul

Au

g

Se

p

Oct

No

v

De

c

Mil

lio

n K

g

Tea Production

2019 2020

Source : Sri Lanka Tea Board

Tea production has returned to the levels observed last year…15


4

5

6

7

8Ja

n

Feb

Mar

Ap

r

May

Jun

Jul

Au

g

Se

p

Oct

No

v

De

c

Mil

lio

n K

g

Rubber Production

2019 2020

Source : Rubber Development Department

…so has rubber production…16


150

175

200

225

250

275

300

Jan

Feb

Mar

Ap

r

May

Jun

Jul

Au

g

Se

p

Oct

No

v

De

c

Mil

lio

n n

uts

Coconut Production

2019 2020

Source : Coconut Development Authority

Coconut production has recovered to a great extent…17


20

25

30

35

40

45

50Ja

n

Feb

Mar

Ap

r

May

Jun

Jul

Au

g

Se

p

Oct

No

v

De

c

Mil

lio

n K

g

Fish Production

2019 2020

Source : Ministry of Fisheries

Fish production is on a recovery path…18


0

200

400

600

800

1,000

1,200Ja

n

Feb

Mar

Ap

r

May

Jun

Jul

Au

g

Se

p

Oct

No

v

De

c

US

$ m

illi

on

Exports

2019 2020

Merchandise exports have reached the level of USD 1 billion a month…19

Sources : Sri Lanka Customs, Central Bank of Sri LankaNote: Exports for August 2020 is provisional


Trade deficit narrowed as the contraction in imports outpaced the contraction in exports…

0

100

200

300

400

500

600

700

800

900Ja

n

Feb

Mar

Ap

r

May

Jun

Jul

Au

g

Se

p

Oct

No

v

De

c

US

$ m

illi

on

Monthly Trade Deficit

2019 2020

20

Sources : Sri Lanka Customs, Central Bank of Sri LankaNote: Trade deficit for August 2020 is provisional


0

50

100

150

200

250

300Ja

n

Feb

Mar

Ap

r

May

Jun

Jul

Au

g

Se

p

Oct

No

v

De

c

No

. of

Tou

rist

s (‘

00

0)

Tourist Arrivals

2019 2020

Source : Sri Lanka Tourism Development Authority

The tourism sector that suffered twin shocks within the span of an year, awaits the recovery in global tourism…

21


A steady year-on-year growth in workers’ remittances is observed…22

300

350

400

450

500

550

600

650

700

750

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

US

$ m

illi

on

Workers’ Remittances

2019 2020



FDI inflows have slowed, but the investment pipeline is strengthening…23

0

500

1,000

1,500

2,000

2,500

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2019 - H1 2020 - H1

US

$ m

illi

on

Foreign Direct investments – Including Loans



170

175

180

185

190

195Ja

n

Feb

Mar

Ap

r

May

Jun

Jul

Au

g

Se

p

Oct

No

v

De

c

LKR

/US

D

Monthly Average Exchange Rate

2019 2020


With these developments, the Sri Lanka Rupee strengthened and remains stable…

24

Note: Average exchange rate for September 2020 as at 24.09.2020


0

2

4

6

8

10

12

14

16

18

20

Jan

Feb

Mar

Ap

r

May

Jun

Jul

Au

g

Se

p

Oct

No

v

De

c

Pe

r ce

nt

Domestic Credit Growth (Y-o-Y)

2019 2020Source : Central Bank of Sri Lanka

A pickup in domestic credit is observed, and private sector credit has begun to accelerate…

25


0

2

4

6

8

10

12

14

16

18

Jan

Feb

Mar

Ap

r

May

Jun

Jul

Au

g

Se

p

Oct

No

v

De

c

Pe

r ce

nt

M2b Growth (Y-o-Y)

2019 2020


With accelerating domestic credit, broad money expansion remains strong…

26


Sharp easing of monetary policy has resulted in historically low market interest rates, supporting economic activity…

27

0

2

4

6

8

10

12

14

Jan

Feb

Mar

Ap

r

May

Jun

Jul

Au

g

Se

p

Oct

No

v

De

c

Pe

r ce

nt

Monthly AWPR

2019 2020

Source : Central Bank of Sri LankaNote: Up to 18 September 2020


Fiscal policy remains supportive of economic recovery…28

0

5

10

15

20

25

De

c-0

2

De

c-0

3

De

c-0

4

De

c-0

5

De

c-0

6

De

c-0

7

De

c-0

8

De

c-0

9

De

c-10

De

c-11

De

c-12

De

c-13

De

c-14

De

c-15

De

c-16

De

c-17

De

c-18

De

c-19

De

c-20

Pe

r ce

nt

Year-end Standard VAT Rate

Source : Inland Revenue Department


Expansionary policies have been supported by well managed inflation and inflation expectations…

29

-5

0

5

10

15

20

25

30

35

Feb

-78

May

-79

Au

g-8

0

No

v-8

1

Feb

-83

May

-84

Au

g-8

5

No

v-8

6

Feb

-88

May

-89

Au

g-9

0

No

v-9

1

Feb

-93

May

-94

Au

g-9

5

No

v-9

6

Feb

-98

May

-99

Au

g-0

0

No

v-0

1

Feb

-03

May

-04

Au

g-0

5

No

v-0

6

Feb

-08

May

-09

Au

g-1

0

No

v-11

Feb

-13

May

-14

Au

g-1

5

No

v-16

Feb

-18

May

-19

Au

g-2

0

Pe

r ce

nt

Year-on-year Inflation (Based on CCPI, Spliced)



4,000

4,500

5,000

5,500

6,000

6,500Ja

n

Feb

Mar

Ap

r

May

Jun

Jul

Au

g

Se

p

Oct

No

v

De

c

Ind

ex

val

ue

Share Market Performance

ASPI - 2019 ASPI - 2020

Source : Colombo Stock Exchange

The low interest rate environment and political stability have also supported the recovery of the stock market performance…

30

Note: ASPI for September 2020 as at 23.09.2020


Business confidence has rightly regained momentum…31

Source : LMD


32

…these hard facts and indicators enable us to reasonably conclude that SRI LANKA is on a steady path beyond recovery towards high economic growth.

the sri lankan economy on a steady recovery path · note: trade deficit for august 2020 is...

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