Sri Lanka is facing the worst decline as the debt crisis approaches

Colombo: Sri Lanka announced its worst economic downturn on Tuesday, with second-quarter GDP falling by 16.3% as international concerns about its ability to repay foreign debt increase.

The census and statistics department said the record fell in the second quarter, compared to a slower 1.6% drop in the first quarter, before the coronavirus pandemic was felt on the island.

Overall, the economy contracted by 5.3 percent in the first nine months of the year, compared to a modest increase of 1.9 percent in the corresponding period last year.

The economy suffered a huge setback last year, when local jihadists killed 279 people with a series of suicide bombs against three hotels and three churches and paralyzed the lucrative tourism industry.

Sri Lanka was emerging from devastating attacks when the coronavirus pandemic hit the island in mid-March, forcing nationwide extinctions.

“The second quarter GDP estimate showed an unprecedented decline in real GDP by 16.3 percent … and is the largest decline ever in Sri Lanka’s history,” the census department said in a statement. a statement.

He said third-quarter results showed a modest 1.5 percent recovery, but overall the economy contracted 5.3 percent for the nine months to September.

Sri Lanka is facing a second wave of infections since early October, with the number of cases rising 10 times to over 33,000, with 154 deaths.

Gloomy economic figures came just days after S&P Global Ratings downgraded Sri Lanka by a note to the CC from B, while international credit agencies were worried about the island’s ability to service its external debt.

The New York-based agency said existing funding sources in Sri Lanka do not appear to be sufficient to cover its estimated debt service needs of just over $ 4.0 billion next year.

International agencies also noted that Sri Lanka’s economy was already weak when the pandemic hit made revenue generation even more difficult.

S&P expects Sri Lanka’s economy to shrink by a record 5.3% by 2020.

The Sri Lankan government has insisted it will honor its debt commitments.