COLOMBO: Sri Lanka’s economic growth rate fell to 3.1 percent last year, from 4.4 percent in 2016, the worst result in 16 years. This slide points to serious economic problems facing the government, amid a worsening debt burden.
The Statistics Department said the services sector, which contributes close to 56 percent of output, grew last year only by 3.2 percent, a significant drop from the previous year’s 4.7 percent result.
The agricultural sector, which accounts for close to 8 percent of the economy, declined by 0.8 percent, mainly due to weather calamities. The industrial sector, which makes up around 27 percent of the economy, grew by only 3.9 percent, a marked fall from the previous year’s 5.8 percent.
The growth statistics appeared on the department’s web site on March 15 but were withdrawn the next day. The department’s head said it received the data “at the last minute” and wanted “full data calculations.” Whatever the reason, the withdrawal embarrassed the crisis-ridden government.
The Sri Lankan stock exchange last week reported its lowest share prices in more than eight weeks. “The market is moving sideways as investors are on the sidelines due to concerns over lower growth,” First Capital Holdings PLC senior research analyst Atchuthan Srirangan said.
In January, Central Bank Governor Indrajit Coomaraswamy predicted a lower economic growth rate for 2017. Together with floods and droughts, he blamed “the tight monetary stance of the Central Bank as well as the relatively tight fiscal policy stance of the government,” which “partly affected public and private investment spending.”
These Central Bank and government policies are the direct result of the International Monetary Fund’s (IMF) austerity program. In return for bailout loans, the IMF insisted that the fiscal deficit be cut to 3.5 percent of the gross domestic product (GDP) by 2020, half the 2014 deficit.
