The economy is projected to rebound gradually from late 2023, supported by the easing of monetary conditions, improvements in business and investor sentiments along with the realisation of improved foreign exchange inflows, the faster recovery of the tourism sector, and the implementation of growth promoting policy measure, said Central Bank (CB) Governor Dr. Nandalal Weerasinghe.
“As reflected by leading indicators, economic activity remains subdued thus far during 2023, reflecting the protracted impact of the severe economic stresses in 2022 and the resultant tighter monetary and fiscal policies needed to support the restoration of macroeconomic stability,” he said.
Policy interest rates reduced in view of the faster deceleration of inflation, benign inflation outlook and the easing of BOP pressures, thereby reinforcing the rebound of the economy.
With greater macroeconomic stability being achieved through corrective policy measures, particularly in terms of faster-than-expected deceleration of inflation thus far during 2023 and the benign inflation outlook and the easing of the BOP pressures the Monetary Board of the Central Bank of Sri Lanka, upon carefully assessing the current and expected developments, decided to relax the stance of monetary policy and reduce the policy interest rates.
This move is expected to accelerate the normalisation of the interest rate structure in the period ahead and broad base the recovery of activity in the economy and ease pressures in the financial markets, thereby steering the economy towards a rebound phase.
Workers’ remittances increased to US dollars 454 million during April 2023 in comparison to US dollars 249 million in April 2022. Consequently, earnings from tourism during January to April 2023 amounted to US dollars 696 million, compared to US dollars 591 million in the comparable period in 2022.
He also said that during the year up to 31 May 2023, the Sri Lanka rupee appreciated by 22.9% against the US dollar.
The trade deficit continued to remain modest in April 2023, compared to a year ago, though it recorded a month-on-month increase for the second consecutive month.
Workers’ remittances and earnings from tourism improved notably in April 2023, compared to the same period of the previous year.
The notable appreciation of the Rupee that commenced in early March 2023, continued through April 2023.
Foreign investments in the government securities market recorded a notable net inflow during the month. Gross official reserves improved further by end April 2023 and last week passed the USD 3.1 billion mark.