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GDP Growth Signals Economic Recovery
Sri Lanka's GDP surged to Rs. 3,329,583 million in Q1 2024 from Rs. 3,161,963 million in Q1 2023, marking a year-on-year growth of 5.3%. This increase reflects a robust recovery across various sectors, emphasizing the economy's resilience and adaptive response to previous economic challenges.
Industrial Sector Leads with Double-Digit Growth
The industrial sector showcased a significant rebound, expanding by 11.8% in the first quarter of 2024. This growth was primarily driven by notable performances in construction, which increased by 14.2%, and mining and quarrying, which rose by 18.3%. Manufacturing also saw a comprehensive upturn of 10.6%, further bolstering the industrial expansion.
Agricultural and Services Sectors Show Varied Performance
Agriculture experienced a modest growth of 1.1%, with notable increases in specific areas like cereal growth (22.4%) and freshwater fishing (18.1%). Conversely, the services sector grew by 2.6%, with significant contributions from accommodation and food services, which soared by 40.4%, and insurance activities, which climbed by 17.8%.
Economic Indicators Reflect Favorable Market Conditions
The positive shift in GDP is also mirrored in other economic indicators. Current price GDP rose by 8.4% to Rs. 7,959,032 million, with taxes less subsidies on products growing by 10.0%. The detailed sectoral growth underscores a broader economic enhancement, driven by lowered inflation and favorable policy adjustments facilitating market activities.
IMF forecast Sri Lanka to grow 2.0% in 2024 and 2.7% in 2025.
Last Updated August 2024
Subtle Rise in Consumer Prices:
July 2024 witnessed a modest increase in the National Consumer Price Index (NCPI), marking a rise to 2.5% from 2.4% a month earlier. This reflects a gradual price adjustments across various sectors.
Food and Non-Food Inflation Diverge:
The food group saw a notable inflation increase to 2.9% in July from 1.9% in June, driven by price hikes in staples like vegetables, fish, and grains. Conversely, the non-food group inflation fell to 2.2%, influenced by a reduction in eletrcity and fuel price revisions.
Core Inflation falls Amid Fluctuating Prices:
Core inflation, which strips out the volatile food and energy sectors, fell to 3.0% from a month earlier. Core inflation underscores the underlying economic factors at play, separate from the more immediate impacts of changes in food and energy prices.
Last Updated September 2024
Surge in Household Spending in Early 2024
In the first quarter of 2024, household final consumption expenditure in Sri Lanka showcased a significant increase, totaling Rs 5,258,960 million. This marked a substantial rise from the Rs 4,728,325 million recorded in the last quarter of 2023, representing a growth of about 11.2%. This sharp uptick highlights a robust return to spending behaviors that indicates a strengthening economic environment and improved consumer confidence after potentially restrictive periods. During this period the steady decline in consumer inflation and lowering on policy interest rates aided consumption.
Yearly Growth Trends Highlight Economic Recovery
Analyzing the year-over-year data, the first quarter of 2024 not only saw a rise from the previous quarter but also a remarkable increase from Q1 2023's expenditure of Rs 5,077,423 million. This 3.6% year-over-year growth further underscores the ongoing recovery and expansion phase of the household sector in the economy, fueled by eased restrictions, increased employment rates, or rising incomes.
Implications and Future Outlook
The sustained increase in household final consumption expenditure through the first quarter of 2024 provides a positive signal towards the economic stability of Sri Lanka. This pattern suggests not only an enhanced consumer confidence but also potentially increased disposable income among the populace, which could drive further economic activities across various sectors.
Last Updated August 2024