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Monthly Economic Update - July 2020

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3 KEY INSIGHTS

  • World Bank Downgrades Sri Lanka back to a Lower- Middle Income Country

  • Treasury Bill Yield Rates Plunges to the Lowest since 1989

  • Gold Prices Hits Highest since 2011 on Renewed COVID-19 Concerns and US-China Tensions

 

Sri Lankan Economy

Trade Deficit Narrowed by 51% in May, Exports recover in June: Restrictions on non-essential imports reduced total imports in May, while exports rebounded more than expected during the month, resulting in narrowing of the trade deficit by 51% on Y-o-Y basis. In June 2020, exports grew by 50% compared to May 2020 led by Apparel..

PMI Returns to Growth Territory in June: With normalizing of economic activities in the country following the complete relaxation of the restrictions to mobility, both the Manufacturing and Services PMI returned to the growth territory (above 50) in June 2020.

The World Bank Downgrades Sri Lanka to Lower- Middle Income Category: The World Bank has downgraded Sri Lanka to lower middle-income category exactly a year after upgrading to an upper-middle income category as GNI Per capita had fallen marginally to USD 4,020 in 2019 and was outside the revised range.

Treasury Bill Yield Rates Plunges to the Lowest Since 1989: Sri Lanka Treasury Bill yields fell to a record low on 22nd July, Wednesday’s auction to their lowest level since 1989. 

Mixed Performance in Fiscal Operations during Jan-Apr 2020: Fiscal operations of the government showed a mix performance during the first four months of 2020, mainly due to the decline in revenue mobilization due to the COVID-19 outbreak and the reduction in government expenditure.

 

Global Economy

Global Economic Recovery will be Long and Bumpy: Moody’s Investors Service says, global economic recovery will likely be prolonged and expects a gradual recovery in the second half of the year, but that outcome will depend on whether governments can reopen their economies while also safeguarding public health.

China Grew by 3.2% in Q2, Rebounding sharply from Q1 Contraction: China’s GDP grew by 3.2% in Q2-2020, compared to a year ago. China’s Q1 GDP contracted by 6.8% in 2020 on a Y-o-Y basis, as the world’s second largest economy took a huge hit from the COVID-19 outbreak. 

Gold Hits Record High: Gold prices continued to rise in July reaching its highest level since 2011 and is up 27% for 2020. The rise is due to safe haven demand by investors with rising US-China tensions and uncertainty about the global economy with rising COVID-19 cases.

 

 

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

Saumya Amarasiriwardane

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