Central Bank notes Sri Lanka on path towards economic revival

The Central Bank of Sri Lanka today noted that Sri Lanka is on a path towards economic revival.

The bank said that the unexpected COVID-19 cluster that has emerged recently could somewhat affect the momentum in the near term, but the expeditious measures that are being taken by the Government to contain the spread could limit this impact.

The release of GDP estimates for the second quarter of 2020 by the Department of Census and Statistics (DCS) has been delayed. It is likely that the second quarter of 2020 has recorded a greater contraction than in the first quarter, followed by a recovery in the third quarter of the year.

However, as per the DCS, the unemployment rate, which was estimated at 5.7 per cent in the first quarter of 2020, has declined to 5.4 per cent in the second quarter. The level of employment has also remained broadly unchanged in the second quarter compared to the large decline reported for the first quarter. These suggest that economic activity has remained without much deterioration in the second quarter, the Central Bank of Sri Lanka said.

Other developments observed in leading indicators and high frequency data since the relaxation of the countrywide lockdown measures suggest that Sri Lanka is on a path towards economic revival.

The Monetary Board of the Central Bank of Sri Lanka, at its meeting held yesterday, decided to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank at their current levels of 4.50 per cent and 5.50 per cent, respectively, thereby continuing the prevailing accommodative monetary policy stance.

The Board noted the decline in overall market lending rates, following the unprecedented monetary easing measures taken by the Central Bank thus far during the year, and expects the broadbased downward adjustment in market lending rates to continue, thereby ensuring affordable credit flows to productive sectors of the economy in the prevailing low inflation environment. (Colombo Gazette)

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