In its latest report on South Asia, the World Bank highlighted that growth rates across the region should remain relatively stable, with growth in India projected to accelerate to 7.3% in 2018 and 7.5% in 2019-20 due to stronger private spending and export growth.
Sri Lanka’s GDP growth is forecasted to average around 4.5% over the medium term, reflecting a recovery from the effects of last year’s adverse weather-related disruptions and more robust consumption and investment growth.
The WB added that the outlook for Sri Lanka remains favorable provided the government is committed to the reform agenda of improving competitiveness, governance and public financial management as these reforms together with the IMF program should add to confidence and support fiscal consolidation efforts.
The Bank estimates that inflation will stabilize at mid-single digits as the impact of natural disasters wanes, but higher global oil prices exert some upward pressure.
The external sector meanwhile is expected to continue benefiting from the GSP+ preferential access to the EU and tourism receipts, even though a deceleration of remittances is likely.
External buffers meanwhile are expected to improve, due to the purchasing of foreign exchange, the maintenance of a more market-determined exchange rate, and increased FDI. The overall fiscal deficit is projected to fall in the medium term, supported by the ongoing implementation of revenue measures. The Bank noted however that a further slowdown in reform implementation, in a challenging political environment, remains the key risk to the Group’s baseline estimate.
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