By Shiran Fernando Chief Economist Ceylon Chamber of Commerce.
The Ceylon Chamber of Commerce recently released its Outlook 2020 Report that explores the year ahead. The theme of the outlook for 2020 revolves around driving economic growth vs economic stability. This article will review in brief the key insights from the report covering the performance of the economy in 2019, and then explore the outlook for 2020.
Sri Lanka’s economy grew at a slower rate of 2.6% during the first nine months of 2019, compared to the 3.3% growth recorded in the corresponding period of 2018. The growth was adversely affected by the 21st April attacks and in particular, growth of tourism and related activities. However, most of the activities which were affected by the 21st April attacks are recovering faster than initially expected which would help accelerate in the next few quarters.
Sri Lanka’s economic growth is expected to recover moderately in 2020 and rise above 3% compared to an estimate of 2.8% in 2019. International forecasters put growth between 3.3% -3.5% at present with the CBSL expecting growth to be above 4%. Our view is that growth will be above 3% and is likely to be under 4% for 2020 supported by the tax revisions and other relief measures provided by the new President.
2019 saw stability in the currency, decline in interest rates and a sharp contraction in the trade deficit. The Export Development Board has set a target of USD 18.5 billion in terms of earnings from merchandise and services exports in 2020, a rise of 15% compared to 2019. The concern for 2020 is that the contraction in the trade deficit will not continue in 2020 with weak export growth and slowdown in the pace of import contraction.
The growth momentum from the stimulus measures can be maintained with the swift implementation of key reforms. The Ceylon Chamber has highlighted some of the other key activities for reform in the 2020-25 period in its publication of the working draft of the Sri Lanka Economic Acceleration Framework (www.seaf.chamber.lk) in September 2019.
With consumption and demand expected to rise in 2020, sectors such as Fast-Moving Consumption Goods (FMCG) and Consumer Durables are expected to perform better. The performance of the Agricultural sector will once again be sensitive towards weather patterns.
The outlook for the global economy in 2020 is more positive relative to 2019 as key trade concerns eased during the end of 2019. However, the recovery from the slowdown in global GDP growth is sensitive to risks such as further escalation of Middle East tensions, non-implementation of the Phase I trade deal between China and US, and risks such as the Novel Corona virus disrupting the growth and trade momentum.
The Outlook 2020 report, published by the Economic Intelligence Unit (EIU) of the Ceylon Chamber, explores the macroeconomic and sector outlook for the year ahead. The sectors covered include Apparel, Consumer Durables, FMCG, Tourism, Construction, Agriculture, Plantations and Dairy, following interviews conducted with experts in each sector. The report provides a review of the economy’s performance, and of each sector’s perspectives on the year ahead. To obtain a copy of the report, please email email@example.com. The e-version of the book can also be purchased under the ‘publications’ tab on chamber.lk (https://www.chamber.lk/index.php/business-publications/outlook-2020-detail).