Sri Lanka is a low middle-income country with a GDP of US $ 3,852 (2019) and a total

population of 21.8 million. With more than six decades of partnership with Sri Lanka, the
World Bank Group continues to support Sri Lanka's transition to a more competitive,
content and flexible country.

Sri Lanka's economy is estimated to be largely independent for the sixth year in a row.
Economic growth was strong at the time, however, reflecting the peace dividend, which
helped shift from a primarily rural-based economy to an urbanized economy centered on
production and services. Key indicators of macroeconomic are real GDP, unemployment
rates, inflation rates, interest rate and stock market conditions.

SriLanka’s Gross Domestic product (GDP).

Sri Lanka's gross domestic product (GDP) in 2019 was 84.01 billion US dollars, according to
World Bank official data and trade economy forecasts. The value of Sri Lanka's GDP
represents 0.07 percent of the world economy.

Trading Economics Global macro models and analysts expect Sri Lanka's GDP to reach USD
Billion 82.00 by the end of 2020. In the long run, Sri Lanka's GDP is expected to be USD
Billion 88.00 in 2021 and USD Billion 97.00 in 2022, according to our environmental metrics.

SriLanka’s Unemployment Rate

The unemployment rate in Sri Lanka decreased from 5.70 percent in the first quarter of
2020 to 5.40 percent in the second quarter of 2020, the highest in 11 years due to the
corona virus outbreak.

Business Economy Global macro models and analysts expect the unemployment rate in Sri
Lanka to be 5.30 percent by the end of this quarter. In anticipation, we estimate that the
unemployment rate in Sri Lanka will be 4.90 over the next 12 months. In the long run, our
economic metrology models show that the Sri Lankan unemployment rate will be 5.10
percent in 2021 and 4.60 percent in 2022.

The unemployment rate in Sri Lanka averaged 7.67 percent from 1991 to 2020, up from
16.60 percent in the second quarter of 1992 and 3.70 percent in the fourth quarter of 2013.

SriLanka’s Inflation Rate

The inflation rate in Sri Lanka did not change to 4 percent in October 2020, which was the
same as in September. Food inflation decreased to 11 percent cent from 10 percent to a 5-
month low. In contrast, non-food spending increased 1.3 percent after a 0.9 percent rise in
September. On a monthly basis, consumer prices rose 0.1 percent after a 0.7 percent rise in
September.

Inflation in Sri Lanka is expected to be 4.70 percent by the end of this quarter, according to
global macro models and analysts of the trade economy. In anticipation, we estimate that
the inflation rate in Sri Lanka will be 3.80 in the next 12 months. In the long run, the Sri
Lankan inflation rate is expected to be 4.00 percent in 2021 and 4.50 percent in 2022,
according to our environmental measurements.

Inflation in Sri Lanka averaged 9.20 percent from 1986 to 2020, up from 28.30 percent in
June 2008 and -0.90 percent in March 1995.

SriLanka’s Interest Rate

The Central Bank of Sri Lanka kept its core interest rate unchanged at 4.5 percent in its 2020
November meeting, but stressed the need for continued downturn in credit rates to boost
economic growth in the absence of demand-driven inflationary pressures, especially given
the prevailing high liquidity in the domestic money market. The bank has cut interest rates
by a total of 350 basis points since May last year, with deadly Easter bombings triggering a
decline in investment and tourism, followed by a corona virus outbreak in early 2020. The
central bank said it would continue and introduce higher interest rates on mortgage-backed
home loans for salaried workers and set credit targets for selected sectors in the future. The
Standing Lending Facility Rate (SLFR) was also kept at 5.5 percent.

Business Economy Global macro models and analysts expect the interest rate in Sri Lanka to
be 4.50 per cent by the end of this quarter. We anticipate that the interest rate in Sri Lanka
will be 4.50 over a 12-month period. In the long run, the Sri Lankan interest rate is expected
to be 4.50 percent by 2021, according to our environmental metrics.

The interest rate in Sri Lanka averaged 7.69 percent from 2003 to 2020, up from an all-time
high of 10.50 percent in February 2007 and 4.50 percent in July 2020.

SriLanka’s Stock Market 

ASPI has increased by 72 points, or 1.18%, since the beginning of 2020, according to trading
on a contract for difference (CFD) which tracks this key index from Sri Lanka.

Trading Economy Global macro models and analysts expect the Sri Lankan stock market (CSE
all share) to trade at 6061.01 points by the end of this quarter. Looking forward, it is
estimated to trade at 5785.23 over a 12-month period.

Historically, the Sri Lankan stock market (CSE All Share) touched an all-time high of 7863.74
in February 2011.

Conclusion

In general, the Sri Lankan economy has a strong construction industry that has contributed
7-9% to GDP over the past five decades (fixed prices). It accounts for 13% of GDP and
provides more than half of the investment in fixed capital (45-60% - current prices). From
unskilled to high tech professionals, this industry is a major employer. In Sri Lanka,
construction provides 5% of total employment. Investigations into the relationship between
macroeconomic factors and stock market performance in many emerging economies,
including Sri Lanka, are relatively limited, and need to be repeated as the basic economic
systems of such economies have changed rapidly over the years. The post-war economic
environment and the subsequent major economic revival in Sri Lanka affected the
performance of the Sri Lankan capital market.

References

[Link]. 2020. Sri Lanka Economy: Population, GDP, Inflation, Business, Trade, FDI,
Corruption. [online] Available at: <[Link]
[Accessed 30 November 2020].

[Link]. 2020. Sri Lanka GDP | 1960-2019 Data | 2020-2022 Forecast |

[Link]. 2020. Sri Lanka Unemployment Rate | 1991-2020 Data | 2021-2022

[Link]. 2020. Sri Lanka Inflation Rate | 1986-2020 Data | 2021-2022

[Link]. 2020. Sri Lanka Interest Rate | 2003-2020 Data | 2021-2022

[Link]. 2020. Sri Lanka Stock Market (CSE All Share) | 1993-2020 Data |
2021-2022 Forecast | Quote. [online] Available at: <[Link]
lanka/stock-market> [Accessed 30 November 2020].
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%20is%2013%25%20of%20GDP.&text=In%20Sri%20Lanka%2C%20construction%20provides
%20around%205%25%20of%20total%20employment.> [Accessed 30 November 2020].

2020. [online] Available at: