Daily Mirror (Sri Lanka)

Sri Lanka’s econ­omy...

- Business · Finance · Sri Lanka · World Bank · World Bank Group

The re­port also pointed out that a fall in re­mit­tances could ad­versely im­pact poor house­holds that rely on them as an im­por­tant source of in­come.

In 2019, worker re­mit­tances ac­counted for 7.8 per­cent of Sri Lanka’s GDP. In April, the World Bank fore­cast 19 per­cent de­cline in re­mit­tance earn­ings for Sri Lanka.

How­ever, work­ers’ re­mit­tance earn­ings have recorded only 1.5 per­cent de­cline in the first eight months of 2020, to US$ 4.35 bil­lion, com­pared to the first eight months of 2019.

High­light­ing the risks and chal­lenges for the coun­try, the re­port stated that a longer than ex­pected out­break of COVID-19, that would ex­tend the hori­zon and depth of re­lated eco­nomic dis­rup­tions, would be a key risk to the coun­try’s eco­nomic out­look. “… a longer down­turn could push many small and medium en­ter­prises from illiq­uid­ity to in­sol­vency and the poverty rate could rise even higher, as more peo­ple suf­fer in­come losses. Low growth would also put ad­di­tional strain on pub­lic fi­nances,” the re­port said.

The World Bank also stressed the need for Sri Lanka to strike a bal­ance be­tween sup­port­ing the COVID-19-HIT econ­omy and en­sur­ing fis­cal sus­tain­abil­ity, as the coun­try is highly ex­posed to the global fi­nan­cial con­di­tion with Sri Lanka debt re­pay­ment prof­its, re­quir­ing the coun­try to ac­cess fi­nan­cial mar­kets fre­quently.

“A high deficit and ris­ing debt lev­els could fur­ther de­te­ri­o­rate debt dy­nam­ics and neg­a­tively im­pact mar­ket sen­ti­ment.”

Mean­while, the World Bank fore­casts Sri Lanka’s fis­cal deficit to widen sharply to 11.1 per­cent this year, from 6.8 per­cent in 2019, the debt-to-gdp ra­tio to ex­ceed 100 per­cent from 86.8 per­cent in 2019. The World Bank ex­pects Sri Lanka’s debt-to-gdp lev­els to re­main el­e­vated over 100 per­cent lev­els in 2021 as well as in 2022.

Due to the de­cline in de­mand, Sri Lanka’s in­fla­tion is ex­pected to re­main be­low 5 per­cent in 2020 and 2021.

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