Sri Lanka’s economy contracts amidst input and supply disruptions
The Sri Lanka’s economy contracted by 4.8 percent year-on-year in 2022 with most of key economic indicators contracted, amid shortages of inputs and supply chain disruptions. High frequency indicators such as the purchasing managers’ indices indicate a continued stress this year.
Headline inflation, as measured by the year-on-year (Y-o-Y) change in the National Consumer Price Index decreased for the second consecutive month, recording 65.0 per cent in November 2022.
Similarly, the Food inflation decreased to 69.8 per cent, while the Non-Food inflation decreased to 60.4 percent. Furthermore, the NCPI measured on an annual average basis, increased to 46.7 per cent in November 2022 from 42.2 per cent in October 2022.
Poverty is expected to have increased in 2022 due to the contraction in the economy. Poorer households are hardest hit owing to food inflation, job losses, limited fertilizer supply and drop in remittances.
Although expenditures increased on account of additional support provided to social protection beneficiaries, public servants and pensioners, several revenue measures, such as a one-off tax imposed on large corporates, helped reduce the primary deficit.
During the period from January to September 2022, total expenditure and net lending increased to Rs. 2,694.8 bn compared to Rs. 2,380.4 bn recorded in the corresponding period of 2021, Central Bank data shows.
During the nine months ending September 2022, overall budget deficit declined to Rs. 1,244.4 bn compared to Rs. 1,328.2 bn recorded in the corresponding period of 2021. During the nine months ending September 2022, domestic financing decreased to Rs. 1,303.5 bn compared to Rs. 1,453.0 bn in the corresponding period of 2021.
Foreign financing recorded a net repayment of Rs. 59.1 bn during the period from January to September 2022, compared to the net repayment of Rs. 124.7 bn recorded in the corresponding period of 2021.
Outstanding central government debt increased to Rs. 24,945.9 bn by end September 2022 from Rs. 17,589.4bn as at end 2021.
By end September 2022, total outstanding domestic debt amounted to Rs. 13,345.6 bn while the rupee value of total outstanding foreign debt amounted to Rs. 11,600.3 bn.
According to Central Bank’ economic indicator report, the reserve money increased to Rs.1.38 trillion during the week from Dec 15 to Dec 22 compared to the previous week amount of Rs.1.34 trillion mainly due to increase in the deposits held by the commercial banks with the Central Bank.
During the year up to 23rd December 2022, the Sri Lankan rupee depreciated against the US dollar by 44.8 per cent. Given the cross currency exchange rate movements, the Sri Lankan rupee depreciated against the Euro by 41.1 per cent, the pound sterling by 38.2 per cent, the Indian rupee by 38.5 per cent and the Japanese yen by 36.4 per cent during this period.
Earnings from Tourism declined to US$ 107.5 million in November 2022 compared to the same month’s amount of $ 115.4 million last year. Workers’ Remittances (Inflows) increased to $384.4 million in November 2022 from $271.4 million in the same month of 2021. Official Reserve Assets (were $1,8 billion as at end November