2019-01-11 06:00:00.6 GMT
By Cynthia Li
(Bloomberg) — Economists slashed Sri Lanka growth forecasts for this year after the economy grew at the slowest pace in five quarters, according to the latest quarterly survey conducted by Bloomberg News.
The biggest revisions were for the first and second quarters, both cut by 1.3 percentage points to 3.3 percent and 4 percent respectively. Growth in 2019 overall is expected to average 4 percent, down 0.3 percentage point from last quarter’s survey.
Economists lowered their first quarter inflation forecast by 1.7 percentage point, and also cut estimates for the rest of the year, bringing the annual average to 4.3 percent from 5 percent seen in the October survey. This matches with the central bank’s projection of average inflation to “remain below 5 percent in 2019 and stabilize in the range of 4-5 percent thereafter with appropriate policy adjustments.”
The Central Bank of Sri Lanka is working to implement a flexible inflation targeting framework this year to maintain price stability and drive economic growth.
Benchmark rates are expected to remain unchanged at least until the end of the first quarter of next year, the same poll shows. Some economists said that the economy will stabilize sooner than expected.
“With the slowness in economic growth, once the macro picture stabilizes, we expect two rate cuts during the year 2019 with 25 basis points each,” said Dimantha Mathew, head of research at First Capital Holdings in Colombo.