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Monthly Economic Update - March 2020



  • COVID-19 disrupts business, economy and supply chains

  • Global recession is now being expected by most forecasters

  • Oil slump continues into March; Brent price down to USD 27 a barrel from USD 66 at start of 2020


Sri Lankan Economy

COVID-19 Disrupts Sri Lankan Economy: The economy and business sectors has witnessed a significant disruption due to the outbreak of COVID-19. The following developments have taken place since the outbreak:

  • The LKR (spot) depreciated against the USD to LKR 189.25 per USD by 25 March 2020 from Rs.182.8 on 13 March 2020. For the year so far, the LKR has recorded a 3% depreciation.
  • In response to this the CBSL introduced urgent measures to prevent financial market panic. In addition, CBSL cut key policy rates by 0.25% and reduced the liquidity ratio for Banks by 1%. CBSL announced relief measures to assist businesses and individuals in line with the government directive.
  • A steep acceleration in outflows has been recorded in foreign holdings of government securities. Between 19th February to 20th March, Sri Lanka recorded LKR 39.5 bn in foreign outflows.
  • Both Manufacturing and Services Purchase Managers Index (PMI) increased at a slower rate in February 2020 on a M-o-M basis. This is expected to contract in March and moving forward with the slowdown in consumption and interruption to work



Global Economy

A Global recession is forecasted for 2020: Analysts and several international agencies, expect that the global economy will grow by less than 2% during 2020, amidst the COVID-19 pandemic. The expectation is for negative growth in the second and third quarter in 2020.

Oil prices continue to fall: During March, crude oil prices continued its sharp fall. Decline in prices was mainly driven by worries on long-term demand destruction amidst COVID-19 outbreak. Brent oil has declined from USD 66 a barrel to USD 27 a barrel by 24 March 2020.

Services trade growth weakens due to COVID-19: WTO’s Service Trade Barometer indicated that global service trade growth which weakened towards the end of 2019 would continue into Q1-2020 as COVID-19 hits global economic activity.

Global PMI records the steepest contraction in over a decade: The global manufacturing PMI decreased by 3.2 index points in February 2020, on a M-o-M basis, which is the steepest contraction in over a decade as COVID-19 outbreak hit supply chains and demand.


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Research Analyst - Economic Intelligence Unit, The Ceylon Chamber of Commerce

Saumya Amarasiriwardane

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