Sri Lanka’s Central Bank (CBSL) Governor Dr. Indrajit Coomaraswamy addressing the media last week said that now ‘Central Bank expects 2018 to end with 4% growth lower from 4.5% forecast earlier”. CBSL governor’s comments came after just in a less than a month’s time since he noted that Central Bank had to revise down the growth target for 2018 to 4%-4.5% from an initial forecast of 4.5%-5%. That time however, he told reporters that CBSL will announce the new growth targets by August 2018. Initially projected economic growth rate of 4.5% was announced by CBSL in January this year.

Earlier World Bank’s projection of Sri Lanka’s growth was at 4.3% in 2018, and the Global Lender largely controlled by Western Economies - the International Monetary Fund (IMF) predicted the same at 4% earlier in July 2018. Sri Lanka’s economy grew 3.2% in the first quarter of 2018, decelerating from 3.5% seen in the fourth quarter of 2017 and the 3.3% growth in the first quarter of 2017. Meanwhile last week CBSL kept policy rates steady on moderate inflation, offset external vulnerabilities, keep securities attractive to foreign investors.

However CBSL also called on banks to ease interest rates as private sector credit growth had recorded to 14.9% in June, whilst CBSL said that credit will hit 13-14% by end 2018 to Rs. 650 billion. Private sector credit growth had decelerated to 14.9% (year-on-year) in June 2018 from 15.1% in May 2018. Meanwhile Broad money (M2b) growth had also decelerated to 14.9% in June 2018 (year-on-year) from 15.0% in May 2018, with the deceleration in private sector credit expansion and net borrowings by the Government from the banking system. Net outflow from government securities reached US $ 229 million up to 1st August according to the latest data.

- Reporting By Devendra Francis