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IMF Staff growth is projected to rebound to 3.7 percent in 2020

Financial News Update: A staff team from the International Monetary Fund (IMF) led by Manuela Goretti visited Colombo during January 29 – February 7, 2020 to meet with the new administration and discuss its policy agenda. At the conclusion of the staff visit, Ms. Goretti issued the following statement0

“The IMF staff team had constructive discussions with the Sri Lankan authorities on recent economic developments and the country’s economic reform agenda. Given the high level of public debt and refinancing needs in the country, ensuring macroeconomic stability calls for fiscal consolidation, prudent monetary policy, and sustained efforts to build international reserves. Ambitious structural and institutional reforms remain critical to raise the country’s growth potential and promote inclusiveness.

“The economy is gradually recovering from the terrorist attacks last April. Real GDP growth is estimated at 2.6 percent in 2019. The recovery is supported by a solid performance of the manufacturing sector and a rebound in tourism and related services in the second half of the year.

High frequency indicators continue to improve and growth is projected to rebound to 3.7 percent in 2020, on the back of the recovery in tourism, and assuming that the Novel Coronavirus will have only limited negative effect on tourism arrivals and other economic activities.

Inflation is projected to remain at around 4½ percent, in line with the Central Bank of Sri Lanka (CBSL) target. After a sharp import contraction in 2019, the current account deficit is expected to widen
to nearly 3 percent of GDP in 2020.

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