Sri Lanka's economy is showing signs of recovery, with the World Bank projecting a better-than-expected performance for 2023, despite a significant contraction. The global financial institution expects the island nation's economy to grow by 1.7% in 2024, following a contraction of 3.8% in 2023, as reported on Tuesday.
The World Bank previously forecasted a contraction of 4.2% for this year and a growth of 1% in 2024. However, the recent projection represents an improvement in the economic outlook for Sri Lanka.
In the second quarter of the year, the Sri Lankan economy shrunk by 3.1%. Despite these challenges, the country has seen several positive economic indicators over the past six months. Inflation has dropped to 1.3% in September, and the local currency appreciated by approximately 12%. Furthermore, foreign exchange reserves have seen an improvement.
In March, Sri Lanka secured a $2.9 billion bailout package from the International Monetary Fund (IMF). Nevertheless, due to potential shortfalls in government revenue, the release of a second tranche from this package may be delayed.
Contrary to the World Bank's projections, Sri Lanka's central bank has predicted a milder contraction of 2% this year. This came after the economy experienced a significant contraction of 7.8% in 2022. As such, while there are signs of recovery, it appears that Sri Lanka's economic journey out of recession will continue into next year.
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