Sri Lanka economic growth projected to moderate to 4-5% in second half

Sri Lanka's economic growth is projected to moderate to between four and five per cent in the second half of the year as elevated consumer prices and restrictive monetary measures take effect.

Governor of the Central Bank of Sri Lanka (CBSL) Dr. Nandalal Weerasinghe confirmed the forecast during a broadcast interview with Bloomberg, explaining that despite the anticipated deceleration, the overall expansion would remain manageable as conditions normalize across the island nation.

Headline inflation climbed to 7.3 per cent in July, marking its highest point since June 2023 after accelerating from near two per cent earlier in the year.

Official data and central bank assessments attributed this surge largely to the implementation of cost-reflective energy pricing under an International Monetary Fund agreement, which drove domestic fuel prices up by more than 50 per cent over a two-month period.

In response to the initial price build-up, monetary authorities raised the key policy rate by 100 basis points in May, though rates were held steady during the subsequent policy review on the grounds that existing settings were sufficient to curb demand pressures.

Governor Weerasinghe noted that provided global crude oil prices anchor near USD 80 per barrel through the remainder of the year, domestic inflation should stabilize and return to the target rate of five per cent by late this year or early next year.