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Is Sri Lanka’s economy sinking as growth contracts 1.5% in the third quarter?

Sri Lanka's economy shrinks--more pain for citizens

Sri Lanka’s already battered economy contracted by 1.5 per cent in the third quarter this year as the country battled a severe foreign exchange crisis and impact of Covid19-induced lockdown. In the second quarter, the country registered a growth of 12.3 per cent.

“The economic growth rate for the third quarter of 2021 is estimated at a negative growth rate of 1.5 per cent,” the Department of Census and Statistics (DCS) said in a release of Sri Lanka's GDP Summary Indicators for the quarter from July 1st to September 30th, 2021.

According to news agency PTI, only the agriculture sector witnessed a positive growth of 1.7 per cent during the third quarter of 2021. The industries and services sectors contracted by 2.1 per cent and 1.6 per cent respectively.

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“These numbers illustrate that while the Sri Lankan government allowed agricultural activities to function, several manufacturing and construction sectors remained grounded during this period due to the lockdown and quarantine restrictions,” the PTI report said.

An Observer Research Foundation study noted that as global food prices have risen, countries like Sri Lanka have borne the brunt given their reliance on imports to sustain themselves. “Tourism sector has been hit due to the pandemic and this is a sector which generates maximum revenue for the island nation. The result has been a depreciation in Sri Lankan rupee, thereby putting more pressure on the country’s foreign exchange reserves,” it said.