Sri Lanka’s industrial sector is set to drive the country’s economy this year (2021) with real GDP growth is expected to gain 4.8 percent due to more favorable base effects from the earlier forecast of 4.2 percent, Fitch ratings agency claimed.
Manufacturing sector remained expanded in January 2021 owing to the expansion in New Orders and Production - the Central Bank announced, forecasting an economic growth of 5 to 6 percent of GDP.
Central Bank Governor Prof. WD Lakshman said ongoing monetary and fiscal stimulus and improving business confidence would help drive growth.
Expectations for manufacturing activities in the next three months improved further with the expectation for the normalisation of economic activities within the country as well as in major export markets
New Orders and Production for industries remained at healthy levels especially in the manufacture of food & beverages sector following the festive season.
However, some respondents in this sector highlighted that lower than expected demand due to the COVID-19 situation affected the business activities.
Employment expanded at a higher rate during this period with new recruitments. However, some manufacturers highlighted that they had to struggle to complete their production on time due to the lack of employee availability mainly with the pandemic related health concerns.
Starting the year with a positive note, the services sector recorded a progress indicating a further recovery in the sector, which was affected by the second wave of COVID-19 pandemic.
This increase was underpinned by the expansions observed in new businesses, business activities and expectations for activity.
New businesses increased in January 2021, particularly with the improvements observed in financial services, transportation, and wholesale and retail trade sub-sectors.
Business activities in the services sector increased in January 2021 for the second consecutive month. Goods and passenger transportation sub-sector recorded an improvement during the month with people adapting to the new normal environment.
Business activities in the accommodation, food and beverage sub-sector improved further with the gradual recovery in domestic tourism owing to the promotional discounts offered during the period.
Moreover, financial services, education and other personal services sub-sectors also experienced an increase in business activities in January 2021.
However, respondents in import trade continuously cited their concerns over restrictions on non-essential imports.