Sri Lanka’s first-half growth will be affected by the drought and the floods, but is expected to pick up in the second half, according to Atchuthan Srirangan, a senior research analyst at First Capital Holdings PLC.
“But slower growth this year will cause a higher loan-to-GDP ratio, which is a concern,” he said.
Inflation could rise in the short term, especially due to crop damage and difficulties in distributing fresh food produce and staple food items, analysts said, after the recent floods and landslides caused by the worst torrential rains in 14 years.
Sri Lanka’s economy grew by 3.8 percent in the first quarter of 2017, slowing from the previous quarter’s 5.3 percent, the state-run Department of Census and Statistics said last week.
Meanwhile Sri Lankan shares rose on Friday for the third straight session to hit a near four-week closing high as investors picked up blue chip stocks.
The Colombo Stock Index ended 0.36 percent higher at 6,718.83, its highest close since May 22, and recorded its first weekly gain in four weeks.
Analysts said investor reaction to slower economic growth in the first quarter was mixed.
Foreign investors were net buyers of Rs. 63.3 million worth of shares, extending the year-to-date net foreign inflow to Rs. 20.71 billion.
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