Sri Lanka’s economy grew at its slowest pace in more than five years from April to June, government data showed on Wednesday (18), as the Easter Sunday bomb attacks that killed over 250 people hit the island nation’s fastest-growing tourism sector.
The economy gained 1.6 per cent in the second quarter of 2019, slowing from a growth rate of 3.7 per cent the previous quarter and its slowest pace since the first quarter of 2014, the government data showed.
But the growth is still better than expected as analysts had predicted a contraction in the June quarter due to negative impacts of the attacks.
Accommodation, food and beverage service activities, which have been rapidly growing due to high tourist influx, fell 9.9 per cent in the June quarter, compared to the same period a year ago.
Sri Lanka’s economy is expected to slump to a nearly two-decade low in 2019, a Reuters poll showed, as tourism, foreign investment and business activity have eased sharply in the wake of the bombings.
Sri Lanka’s central bank has estimated this growth at 3.1 per cent slowing from the last year’s 3.2 per cent, its lowest since a contraction following a terrorist attack on the island nation’s main airport in 2001.
Since the Easter attacks, the central bank has cut the key policy rates by 100 basis points, but the private sector credit growth, a bellwether of the economy, has yet to pick up.
Sri Lanka’s services sector, accounting for more than half of the economy, grew at 4.1 per cent in the first quarter of 2019, compared to 4.4 per cent in the same period last year, data issued by the statistics department showed on Wednesday.
The industrial sector, accounting for more than a quarter of the economy, grew by 1.4 per cent, compared to 2.8 per cent growth the previous period while agriculture grew 1.0 per cent, compared to an earlier 5.6 per cent.
Growth in 2018 hit a 17-year low of 3.2 per cent, from 3.4 in 2017, due to a political crisis after president Maithripala Sirisena abruptly sacked his prime minister Ranil Wickremesinghe and dissolved parliament. That was later ruled unconstitutional, and Wickremesinghe was reinstated.
The crisis created panic and uncertainty among investors, who dumped Sri Lankan government bonds and other assets, sending the rupee currency to record lows.
Tourism, which accounts for five per cent of the country’s gross domestic product, has suffered as travellers cancelled hotel and flight bookings.