Sri Lanka’s economy is estimated to have grown by 5.2 percent, in the first three quarters of 2024, with key economic sectors recording expansions, Central Bank (CBSL) Governor Dr. Nandalal Weerasinghe said on Wednesday, at an event in Colombo.

Addressing the launch of ‘Central Bank’s Policy Agenda for 2025 and Beyond,’ Dr. Weerasinghe said leading economic indicators of industry and service sectors reflect a continuation of the expansion in output in the last quarter of 2024 as well. Thus, the real GDP is projected to have grown by around 5.0 percent in 2024, registering the highest annual growth since 2017, Dr. Weerasinghe said.

This higher-than-expected growth shows that deflation in recent months was not due to demand factors but mainly due to supply-side factors, the CBSL Governor said.

Dr. Weerasinghe said that in 2024, the Central Bank had eased monetary policy on three occasions leading to lower interest rates.

This supported the economy to progress and encouraged consumer spending and promoted investments that laid the basis for the economic recovery, he said.

He added that the credit extended to the private sector expanded notably in 2024, while credit obtained by the public sector contracted, freeing up financial resources for private-sector investment.

The CBSL Governor said the Central Bank facilitated the increased demand for currency by providing adequate currency notes and coins to the banking system, which ensured that transactions could be carried out unhindered amidst the recovery in domestic economic activity.

He added that in 2024, the public adoption of digital payments continued to increase rapidly, and customers’ payments to government institutions through online payment platforms have also recorded a notable expansion.

He added that the Central Bank purchased the highest-ever annual amount of foreign exchange from the domestic foreign exchange market in 2024, exceeding 2.8 billion (net) U.S dollars.

The gross official reserves increased to around 6.1 billion dollars by the end of 2024 compared to 4.4 billion dollars at the end 2023, Dr. Weerasinghe said.

He added that in 2024 restrictions, in place since 2020, on investments made outside Sri Lanka by resident Sri Lankans and capital transfers by emigrants were significantly relaxed.

Meanwhile, the rules relating to the repatriation of export proceeds to Sri Lanka and their conversion into Sri Lanka rupees were relaxed, he said.

He mentioned that the Central Bank’s focus going forward will be on stabilizing inflation around 5 percent, while ensuring that the economy remains on track towards achieving sustained growth over the medium term, thereby ensuring the prosperity of the nation.

Dr. Weerasinghe added that with a view to making low-interest rate credit accessible, the Central Bank will closely work with banks and other financial institutions, in 2025, to reduce the excessive interest rates still prevalent in the market.   (RK)