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Monthly Economic Update - May 2020

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3 KEY INSIGHTS

  • CBSL cuts rates for the third time in 2020 to spur economic activity 

  • Sri Lanka’s PMI hits a historical low in April 2020 while Global Manufacturing PMI at a 11-Year low

  • Oil prices recover and rise in May on the back of supply cuts and Sino-American tensions

 

Sri Lankan Economy

CBSL Cut Policy Rates Again: During May, CBSL cut its policy rates (SDFR and SLFR) for the third time so far in 2020 in order to support economic activity affected by COVID-19. Accordingly, SDFR and SLFR were reduced to 5.5% and 6.5% respectively, a decline of 1.5% for the year so far.

PMI Falls Further: During April, both Manufacturing and Services PMI of Sri Lanka fell further and reached a historical low level due to the impact of COVID-19 pandemic.

Remittances fall sharply in April: Remittances inflows fell by 32% in April 2020 showing early signs of the impact of COVID-19. The decline is expected to worsen with no worker departures and repatriation of migrant workers.

Per Capita GDP Falls in 2019: As per the latest statistics of the CBSL, per capita GDP declined to USD 3,852 from USD 4,079 in 2018. In absolute terms, GDP fell to USD 84 billion in 2019 from USD 89 billion. 

Trade Deficit Widened in February: 9.1% import growth driven by consumer goods imports coupled with only a 0.7% growth in exports resulted in the trade balance widening by 27% in February 2020. 

 

Global Economy

Global Manufacturing PMI at an 11-Year Low: Global manufacturing collapsed in April at a rate not seen since the height of the global financial crisis, as increasingly widespread measures taken to fight the COVID-19 pandemic led to factory closures, slumping demand and supply chain delays.

Global Oil Prices Rise in May post steep fall: Brent oil prices rose to USD 35 a barrel by 25 May after falling to a low of USD 20 a barrel during the last week of April on the back of supply cuts and US-China tensions.

China’s Economy Shrank by 6.8% in Q1-2020: China reported that in Q1-2020, GDP contracted by 6.8% compared to the same period last year, as the COVID-19 outbreak seriously impacted the world’s second largest economy.

 

 

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

Saumya Amarasiriwardane

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