...Source: BMI, Department of Census and Statistics slightly to -- over our forecast period of ---------, from around -- at present. Although the government under the helm of President Sirisena is likely to embark on a more transparent and prudent fiscal plan, high recurrent spending such as public sector salaries (which accounts for a quarter of total government expenditure) will make it difficult for the government reverse its fiscal spending. Public debt as a share of GDP will fall to around -- over our forecast period of ---------, from --.- in ----, as the government improves the collection of direct taxes (which account for less than -- of total tax revenue), and reduce its reliance on debt. ...Net Exports: Sri Lanka s net export deficit accounts for - of GDP at present, as large remittance inflows allowed the country to sustain its trade imbalance. Over our forecast period of ----- ----, we see this trade deficit narrowing to - of GDP as Sri Lanka s productive capacity improves, and its manufacturing and services export sectors grow in importance.
...Despite a likely recovery in the industrial sector over the coming quar- ters, we expect the Sri Lankan economy to face mounting headwinds from a difficult global economic outlook, a high fiscal deficit, and rising risks of a BoP crisis. As such, we have downgraded Sri Lanka s real GDP growth forecast for ---- to -.- , from -.- previously, repre- senting a stabilisation of growth in the economy (with growth estimated to come in at -.- in ----). Sri Lanka s economic growth slowed to -.- y-o-y cumulatively for the first nine months of ----, as compared with -.- in the corresponding period of ----, prompting us to downgrade our estimate for real GDP growth in ---- to -.- , from -.- previously. Although we expect the industrial sector to post a recovery over the coming quarters (following the United National Party s UNP victory at the August ---- general election, which reinstated political clarity and foreign policy consistency in the island-nation), firm headwinds such as a middling global economic outlook, a persistently high fiscal deficit, and rising risks of a balance of payment (BoP) crisis will likely cap economic growth potential in ----. As such, we now expect the economy to stabilise over the coming year, and have downgraded our ---- real GDP growth forecast to -.- , versus -.- previously. ...However, this was largely driven by a strong recovery in the highly volatile agricultural sector, which is unlikely to be sustainable. The services sector is also unlikely to provide support over the coming quarters, recording a considerable slowdown in Q---, indicating a steady reduction in consumer confidence.
...Despite a likely recovery in the industrial sector over the coming quarters, we expect the Sri Lankan economy to face mounting headwinds from a difficult global economic outlook, a high fiscal deficit, and rising risks of a BoP crisis. As such, we have downgraded Sri Lanka s real GDP growth forecast for ---- to -.- , from -.- previously, a stabilisation of growth in the economy (with growth estimated to come in at -.- in ----). ...
