Snapshot of the Economy
Here’s a quick look at how key economic variables have performed during the year so far
The key to understanding their performance:
Gross Official Reserves: Reserves declined during 1H2020 falling from US$7.6bn at end-December 2019 to US$ 6.7 bn at end-June 2020. A US$400 mn currency swap in July propped reserves back up to US$7.1bn by end-July.
Foreign holdings: Saw a sharp fall during 1H2020 falling US$91.2 bn from Rs.104 bn by end-December 2019 to just under Rs.13 bn by end-July 2020 as a result of the uncertainties related to the pandemic.
USD/LKR: The LKR weakened during the first half of 2020, recording a high of 199.75 in April due to unfavourable economic conditions, before moderating around the 185 mark.
Inflation: Remained relatively low during 1H2020 due to favourable food supply in the Maha harvesting season as well as the statistical effects of the high base which prevailed during 2019
Trade deficit: Fell steadily in 1H2020, recording the lowest monthly deficit since August 2009, due to the reduction in imports as a result of weak consumer sentiment and import restrictions.
Credit to private sector: Was up Rs. 23bn during 1H2020, due to relief measures aimed at propping up private sector credit and economic growth. However, private sector credit declined in absolute terms during the latter part of 1H2020 falling Rs. 110bn from end-March to end-June.
Condition of EMs and FMs: Financial markets were weaker in 1H2020 given the risk-off sentiment due to the pandemic. However, the markets seemed to be turning around by the end of July as developing economies ramped up monetary easing measures and the dollar slumped.
Global situation: Has weakened considerably due to the pandemic but seemed to be improving by the end of June. Although caution due to uncertainties regarding trade tensions and the resurgence of the virus is still warranted.
If you would like to look at the underlying numbers on each of these variables, click the button below