LNP – Sri Lanka will take two more years to reach GDP similar to 2018’ – CBSL Governor

The Governor of the Central Bank of Sri Lanka Dr. Nandalal Weerasinghe says it will take at least two years for Sri Lanka to reach a real GDP value similar to that of 2018.

Speaking at the CBSL’s Monetary Policy briefing on Wednesday (26), the Governor further said this year’s economic growth will depend on policies implemented within the year, mainly fiscal and structural policies.

Dr. Weerasinghe, who further clarified that the negative inflation is temporary, noted that it is mainly due to repeated reductions in electricity tariffs and fuel prices, not because of volatility in demand and supply or monetary policy.

“Deflationary conditions are expected to gradually ease from March 2025, with inflation projected to turn positive by mid-2025”, he added.

He mentioned that therefore, the Monetary Policy Board has decided to keep the Overnight Policy Rate at 8%.

“We see that other interest rates are also coming down to favorable, more normal levels. With that, we observed 5% economic growth last year, showing an expansion in the economy that had been contracting for two consecutive years. We expect this trend to continue”, Dr. Weerasinghe highlighted.

When asked whether the private sector credit being reported at Rs. 105 billion in February 2025 is due to the demand for vehicle imports, the CBSL Chief said, “We do not see such a relationship. So far, only around USD 200 million worth of Letters of Credit have been opened.”

“When we analyze economic activity, there is substantial growth, and we see contributions shifting in that direction”, he added.