COLOMBO – Sri Lanka’s gross domestic product in 2021 has been downgraded to 4.0% by the International Monetary Fund (IMF) from a 5.3% forecast in October 2020, with global growth upgraded to 6.5% from an earlier 6.0%.
Sri Lanka has already reported a contraction of 3.6% for 2020. The global expansion is led by the US, which is expected to grow at 6.4% after contracting 3.5% in 2020. Europe is expected to grow 4.5%, with the Euro area growing 4.4%.
Asia is expected to record a 7.6% growth with China at 8.4% after recording 2.3% growth in 2020 and India ata 12.5% after contracting 8.0% last year.
“Thanks to the ingenuity of the scientific community hundreds of millions of people are being vaccinated and this is expected to power recoveries in many countries later this year,” IMFs Chief Economist Gita Gopitnath said.
“Economies also continue to adapt to new ways of working despite reduced mobility, leading to a stronger-than-anticipated rebound across regions.
“Additional fiscal support in large economies, particularly the United States, has further improved the outlook.”
US President Joe Biden has unveiled an infrastructure plan. However ex-Fed Chief Janet Yellen, who imposed two monetary squeezes in 2014 (quantity tightening) and 2018 (rate hikes and more quantity tightening), has said it should be tax funded.
She has also called for a single corporate tax around the world.
“The pandemic is yet to be defeated and virus cases are accelerating in many countries,” Gopinath said.
“Recoveries are also diverging dangerously across and within countries, as economies with slower vaccine rollout, more limited policy support, and more reliance on tourism do less well.”
Heavily tourism reliant Maldives is expected to grow 18.9% in 2021 after contracting 32.2% in 2020.
Sri Lanka has kept downcCoronavirus with active tracing and home isolation and a vaccination drive is underway.
Sri Lanka’s Central Bank is forecasting a 6.0% growth for 2021.