The economic outlook for the economy, in both the short and medium term, will be determined to a significant extent by the degree of policy discipline maintained during and after the 2019 presidential election period, Central Bank said.
The growth of the Sri Lankan economy moderated in the first half of the year amidst challenges emanating mainly in the domestic front, including the spillover effects of the Easter Sunday attacks.
Accordingly, the economy grew at a slower pace of 2.6 per cent in real terms in the first half of 2019, compared to 3.9 per cent recorded in the corresponding period in 2018.
The unemployment rate also increased during the first half of 2019 in line with subdued economic growth.
Headline inflation continued to remain within the anticipated range thus far during the year, with occasional volatilities due to supply side developments.
Core inflation accelerated in January 2019, mainly due to a one-off adjustment in house rentals, and the impact of this adjustment is expected to wear off in January 2020.
The Central Bank continued to conduct monetary policy in a forward looking manner within an enhanced monetary policy framework aimed at stabilising inflation in mid-single digit levels.
The trade deficit contracted significantly during the first eight months of 2019 in comparison to the corresponding period of 2018, with lower import expenditure and increased earnings from exports.
The contraction of the trade deficit and healthy inflows to the services account helped record a surplus in the current account in the first quarter of the year, although a notable moderation in tourism earnings and workers’ remittances in the second quarter caused a marginal deficit in the current account in the first half of the year.
Meanwhile, the financial account improved, particularly with the issuance of International Sovereign Bonds (ISBs).
(LI)