(Reuters) – Sri Lanka’s economy shrank 1.5% in the third quarter from a year earlier due to a third COVID-19 wave that peaked in August hitting industries and services, the government data office said on Wednesday.
Agriculture grew by 1.7% in the quarter but industry and services shrank 2.1% and 1.6%, the state-run census and statistics department said in a release.
“The expectation was for a contraction in the third quarter given COVID-19 related challenges. The government extended support for the agriculture sector despite pandemic restrictions but the other two sectors struggled.”, Dimantha Mathew, Head of Research for First Capital told Reuters.
Growth is likely to remain muted at less than 3% in the fourth quarter, Mathew added, due to higher inflation, weak demand and pending debt repayments. However, the central bank predicts economic growth of 5% for 2021.
“Sri Lanka will find it difficult to hit its growth target of 5%. Growth of about 4.2% is more possible.”
Sri Lanka’s retail inflation accelerated to a near decade-high of 9.9% in November, pushed up by surging food prices that hit 17.5%.Report ad
Growth was also hit by import restrictions imposed by the government last year to conserve reserves. Sri Lanka’s reserves dipped to $1.6 billion at the end of November, data from the central bank showed.
The country has to meet about $4.5 billion in debt repayments next year starting with a $500 million international sovereign bond in January.
Central Bank Governor Ajith Nivard Cabraal said Sri Lanka is confident of being able to “seamlessly” repay all of its sovereign debt that comes due in 2022.