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BLOOMBERG
Sri Lanka’s economic contraction probably worsened last quarter as borrowing costs at a two-decade high to quell Asia’s fastest inflation took its toll on a nation chasing a $2.9 billion bailout.
Gross domestic product fell 13.4% in the three months to December from a year ago, according to a median estimate of economists in a Bloomberg survey. That would be the biggest drop in more than two years and compares with an 11.8% slump reported for the prior quarter.
The nation’s statistics department was set to release the data. The bankrupt island nation grappled with soaring costs, depleted funds and severe supply shortages for much of last year as it pursued a loan program with the IMF after a debt default in May.
While waiting for IMF relief, Sri Lanka repurposed funds, tightened its belt and raised interest rates to the most since 2001. By the final quarter of 2022, its economic engines had taken so much beating.
“A downturn in manufacturing, a decline in purchasing power and supply-side issues had significant impact on the economy,†said Udeeshan Jonas, chief strategist at Capital Alliance Holdings. High input costs and dollar shortage also held the economy back, he said.
The Sri Lankan rupee is up about 12% since January, and is the world’s best performing currency so far this year, after it suffered a 45% slide in 2022.