Growth rebounded to 1.5% in the 3Q after a severe contraction of 16.3% in 2Q, the Census and Statistics Department (CSD) said yesterday, releasing long-awaited data, which also revised slightly down the 1Q growth from -1.6% to -1.7%. The latest data indicates that Sri Lanka’s growth contracted 5.3% for the first three quarters for 2020 and could end the year with further downward growth given the partial curfews imposed due to the second COVID-19 wave in October. In its mid-year forecast the Central Bank predicted a contraction of 1.7% for the entire year while Budget 2021 has predicted a robust turnaround of 5.5% growth for next year.
Throughout the third quarter in the year 2020, the country experienced the normalisation of business activities and return to new normality in the day-to-day lifestyle of the people, after the first wave of the COVID-19 pandemic. This favourable condition resulted in economic activities performing well, especially in the third quarter and has resulted in recording 1.5% of positive growth rate in the economy for the first time for the year 2020.
“This recorded positive growth rate reflects the great recovery of the economy after the contraction in economy in first and second quarters of this year,” the statement said.
Accordingly, all Agriculture and Manufacturing activities and many of the Service activities including Wholesale and Retail Trade, Goods and Land Passenger Transport, IT Industry, Telecommunication Industry, Financial and Insurance Services, Real Estate Activities, Professional Services and Private Health Services have reported positive growth rates when compared to the third quarter in the year 2019, when the economy grew at 2.4%.
GDP for the third quarter of 2020 at constant price has increased up to Rs. 2,545,863 million from Rs. 2,509,418 million which recorded in the third quarter of 2019. In addition, the GDP for the third quarter of 2020 at current price has increased up to Rs. 4,085,213 million from Rs. 3,833,960 million which recorded in the third quarter of 2019 registering 6.5% of change in the current price GDP.
The four major components of the economy; ‘Agriculture’, ‘Industry’, ‘Services’ and ‘Taxes less subsidies on products’ have contributed their share to the GDP at current prices by 8.2%, 27.7%, 56.8% and 7.4% respectively in the third quarter of 2020. Accordingly, for the first time in the year 2020, all three major economic activities of Agriculture, Industry and Services have reported positive growth rates in the third quarter of 2020, showing recovery in the major economic activities after the COVID-19 pandemic.
The Agriculture sector has reported a substantial growth in the value addition of agricultural production by 4.3% during the third quarter in the 2020. Following that the Industrial sector has also reported 0.6% of growth during this quarter. Out of that, the Manufacturing industry has shown a significant growth by 5.3% during this quarter, when compared to the third quarter in year 2019. Moreover, the Services sector too recorded 2.1% of positive growth rate during this quarter.
Agriculture sector: The expansion in Agriculture activities were mainly driven by the ‘Growing of cereals’ (256.6%), ‘Fresh water fishing’ (20.6%), ‘Growing of rice’ (15.5%), ‘Growing of vegetables’ (11.6%), ‘Growing of rubber’ (11.5%), ‘Growing of fruits’ (8.3%), ‘Growing of spices’ (6.0%) and ‘Animal production’ (2.85) in the third quarter of 2020 when compared to the same quarter in the previous year. However, during the third quarter of 2020, ‘Marine fishing’ (11.6%), ‘Forestry and logging’ (7.8%), ‘Growing of Oleaginous fruits; including Coconut’ (5.1%) and ‘Growing of tea’ (4.3%) have contracted further in the third quarter in the year 2020.
Industry sector: In the third quarter of 2020, the overall industrial activities have reported positive expansion by 0.6%. This positive growth is basically underpinned by the significant growth of 5.3% recorded in the Manufacturing industry as a result of the normalisation of the business activities, in the third quarter. After the nation-wide lockdown were lifted, many Manufacturing sector activities started to return to their usual capacities in the production process. As a result, many activities recorded positive growth rates in the Manufacturing sector.
The ‘Manufacture of food, beverages and tobacco products’ activity which is the highest contributor (6.9% share for the GDP) to the country’s industrial sector, has recorded outstanding growth of 11.5% in the third quarter of 2020, when compared to the third quarter in 2019. In addition, ‘Manufacture of chemical products and basic pharmaceutical items’ (13.1%), ‘Manufacture of rubber and plastic products’ (4.8%), ‘Manufacture of other non- metallic metal products’ (4.2%), ‘Other manufacturing’ (1.1%) and ‘Manufacture of textiles, wearing apparel and leather related products’ (0.1%) have reported positive growth rates during the third quarter. However, the activities of ‘Manufacture of basic metals and fabricated metal products’ (6.9%) and ‘Manufacture of machinery and equipment’ (0.7%) have reported negative growth rates.
Among the ‘Industrial activities’, ‘Construction’ activity, which corresponds to 6.5% of share within the industry sector, recorded substantial contraction by 9.1% in this quarter showing the continuous negative impact of the COVID-19 pandemic, on that industry. Following that decline in Construction activity, the ‘Mining and quarrying’ activity too recorded negative growth rate of 6.8% during the third quarter of 2020. Meanwhile ‘Electricity, gas, steam and air conditioning supply’ and ‘Water collection, treatment and supply’ activities have recorded 2.1% and 4.1% of positive growth rates respectively in this quarter.
Service sector: During the third quarter of 2020, the performance of Services sector recorded substantial expansion by 2.1%. This sector underpinned specially by the sub activities of ‘Telecommunication’ (16.5%), ‘IT programming consultancy and related activities’ (13.5%), ‘Financial service activities’ (12.3%), ‘Human health activities’ (4.6%), ‘Insurance activities’ (4.1%), ‘Wholesale and retail trade’ (2.9%), and ‘Transport services’ (0.9%). Due to the adverse effect of COVID-19 pandemic, an outstanding contraction of 42.1% was recorded in ‘Accommodation, food and beverages service activity. ‘Other personal services’ also reported a contraction of 0.5% in this quarter.
2Q numbers: Releasing a separate statement the DCS stated the GDP growth rate for the second quarter of 2020 has been estimated as 16.3% of negative growth rate when compared to the 1.1% of positive growth recorded in the second quarter of 2019.
The Gross Domestic Product for Sri Lanka for the second quarter of 2020 at constant price has declined up to Rs. 1,936,273 million from Rs. 2,312,078 million which recorded in the second quarter of 2019. In addition, the Gross Domestic Product for Sri Lanka for the second quarter of 2020 at current price has decreased up to Rs. 3,012,013 million from Rs. 3,589,246 million which recorded in the second quarter of 2019 registering 16.1% of negative change in the current price GDP value.
The four major components of the economy; ‘Agriculture’, ‘Industry’, ‘Services’ and ‘Taxes less subsidies on products’ have contributed their share to the GDP at current prices by 9.7%, 24.8%, 61.2% and 4.3% respectively in the second quarter of 2020. As a result of the COVID-19 outbreaks, many sectors in the economy severely affected and it led to slow down the country’s economic performance.
Accordingly, the GDP estimates of the second quarter of 2020, have reported contraction in all three major economic activities of Agriculture, Industrial and Services by 5.9%, 23.1% and 12.9% respectively. In addition, in the second quarter of 2020, the ‘Taxes less subsidies on products’ has recorded 30.1% of decrease with compared to the second quarter in the year 2019. This is due to the major fall in tax revenues due to the amendments made in the tax rates and the thresholds. This has affected to slowdown the overall GDP growth rate of the country.
Agriculture sector: The contraction in the Agricultural activities were mainly driven by ‘Marine fishing’ (39.1%), ‘Growing of Oleaginous fruits; including Coconut’ (14.2%), ‘Growing of tea’ (10.5%), ‘Growing of rubber’ (11.5%), ‘Forestry and logging’ (27.3%) and ‘Animal production’ (1.6%) in the second quarter of 2020 when compared to the same quarter in the previous year. Nevertheless, the activities of ‘Growing of cereals’ (124.7%), ‘Growing of rice’ (17.2%), ‘Growing of vegetables’ (12.9%), ‘Growing of fruits’ (6.3%), ‘Growing of spices’ (4.7%) and ‘Fresh water fishing’ (11.0%) were expanded further during this quarter of 2020.
Industry sector: In the second quarter of 2020, due to the COVID-19 pandemic the overall industrial activities declined drastically by 23.1%, showing impressive adverse impact of the pandemic. Sri Lanka’s overall manufacturing industry experienced a negative growth of 20.6% in the second quarter of 2020, following the downfall in the Industrial Production Index in the second quarter 2020. This is due to the halt of production as a result of imposed curfew in many districts of the country from April to mid of May.
The contraction in Manufacturing activities was mainly driven by the ‘Manufacture of textiles, wearing apparel and leather related products’ activity which recorded negative growth rate of 44.2% during this quarter. In addition, ‘Manufacture of rubber and plastic products’ (42.0%), ‘Manufacture of furniture’ (35.2%), ‘Manufacture of coke and refined petroleum products’ (25.4%), ‘Manufacture of other non-metallic metal products’ (20.9%), ‘Other manufacturing’ (20.6%) and ‘Manufacture of chemical products and basic pharmaceutical items’ (12.7%) have reported negative growth rates. Meanwhile the ‘Manufacture of food, beverage and tobacco products’ activity which is the highest share to the country’s industrial sector, has recorded a minor negative growth of 0.2% in the second quarter of 2020.
Among the ‘Industrial activities’, ‘Construction’ activity, which corresponds to 6.8% of share within the industry sector, recorded substantial contraction by 30.1% in this quarter showing huge negative impact of the COVID-19 pandemic on that industry. Following that decline in Construction activity, the ‘Mining and quarrying’ activity too recorded negative growth rate of 28.4% during the second quarter of 2020.
In addition, ‘Electricity, gas, steam and air conditioning supply’ has recorded 10.3% of contraction within the industry and that is due to the low demand made from the Industrial sector for the electricity. Meanwhile, the ‘Water collection, treatment and supply’ (3.7%) and ‘Sewerage, waste, treatment and supply’ (3.3%) activities have recorded positive growth rates in this quarter.
Service sector: During the second quarter of 2020, the performance of Services has recorded substantial drawback in many Services sector activities by 12.9%, especially ‘Accommodation, food and beverages service activity’ (63.5%), ‘Transportation of goods and passengers including warehousing’ (36.1%), ‘Other personal services’ (31.5%), ‘Real estate activities’ (16.9%), ‘Professional services’ (14.5%) and ‘Wholesale and retail trade’ (1.5%) have shown the collapse in their activities. However, amidst this pandemic, some sectors have reported positive growth rates; such as ‘Telecommunication’ (19.6%), ‘IT programming consultancy and related activities’ (15.1%), and ‘Financial service activities’ (9.9%).
(FT)