Sri Lanka announced on Friday that its economy shrank by 3.6 per cent last year. This marks the worst economic downturn for the country since independence from Britain since 1948.
The Central Bank of Sri Lanka said in its annual report that it hoped that the economy would rebound in 2021 and record an optimistic six percent growth on the back of improved local manufacturing and services.
“The pandemic has also offered an opportunity to reset the economy’s focus and to address longstanding structural weaknesses and establish a production-based, productivity-driven economy,” the bank said.
Coronavirus pandemic hit Sri Lanka’s tourism sector. Sharp contractions were seen in construction, manufacturing and in services, said the bank.
The bank also said that the central government’s debt also rose to 101 percent of GDP last year. It was 86.8 per cent in the year before that.
International rating agencies have expressed fears for Sri Lanka’s ability to service its huge foreign debt as the country’s foreign reserves fell sharply in the past year.
The island’s economy was trying to recover from the effects of the 2019 Easter Sunday bombings that killed 279 people when the pandemic hit in early 2020.
Two weeks ago, Sri Lanka secured a $500 million loan from China to shore up its foreign exchange reserves as the local currency came under intense pressure and fell to a record low.
Chinese influence in the South Asian Nation has been growing in recent years through loans and projects under its vast Belt & Road Initiative, raising concerns among Regional Powers and Western Nations.