Sri Lankan economy drags into a modest recession

Sri Lankan economy is set to face a modest recession of around – 0.6 or a slow growth of 1.4 per cent if the coronavirus is contained within two or three more months under moderate global recovery even with high overall impact on the island nation, economic analysts said.

The COVID-19 economic shock is now affecting government revenue with almost half of the income (revenue) flowing from import taxes (much reduced now), and one third from taxes on consumption, including that of cigarettes and alcohol.

The Finance Ministry, with expenditure controls in place coupled with the savings from the tax reductions in government service delivery, expects a saving of 0.6-0.7 per cent of GDP in government expenditure.

During the first four months of this year, cash inflows from revenue collection authorities including the Inland Revenue Department, Customs Department, Excise Department, and Motor Traffic Department have slowed down since mid-March due to the lockdown.

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