Economy Shows Positive Growth After Years of Decline

COLOMBO (News 1st); Governor of the Central Bank of Sri Lanka, Dr. Nandalal Weerasinghe noted that the current deflationary and inflationary conditions are temporary, primarily driven by continuous reductions in electricity prices rather than changes in monetary policy demand. 

Dr. Weerasinghe expressed optimism that by the third quarter of this year, the deflationary pressures would ease, and inflation would stabilize at a modest level, aligning with the Central Bank's target.

"The current policy interest rate of 8% is deemed the most appropriate monetary policy stance. The Monetary Board has decided to maintain this rate, considering the economic outlook and inflation projections," Dr. Weerasinghe stated.

Addressing concerns about the economic downturn in previous years, Dr. Weerasinghe acknowledged the significant challenges faced by the economy, including a 7.2% contraction in 2022 followed by a 2.3% decline. However, he highlighted the positive growth of 5% in 2024, marking the first year of recovery after the economic crisis.

"We anticipate that it will take another year or two for the economy to return to its pre-crisis size. The gradual recovery is evident, but reaching the economic levels of 2018 will require sustained efforts," he added.

Dr. Weerasinghe emphasized the importance of data-driven policy decisions and the need for continuous monitoring of economic indicators to ensure informed and timely responses to emerging challenges.