CBSL says Coronavirus likely to affect economic performance

The Monetary Board of the Central Bank of Sri Lanka has decided to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank at their current levels of 6.50 per cent and 7.50 per cent, respectively, and thereby continue its accommodative monetary policy stance.

The Board arrived at this decision  following  a  careful  analysis  of the current  and  expected developments in the domestic economy and the financial market as well as the global economy. The decision of the Monetary Board is consistent with the aim of maintaining inflation in the 4-6 per cent range while supporting economic growth to reach its potential over the medium term.

Coronavirus will affect Sri Lanka's economic performance

The exact impact on the Sri Lankan economy would depend on the extent of the global spread of the COVID-19 outbreak, its persistence and policy responses of major economies andtrading partners, the Central Bank said.

Sri Lanka’s economic links with China could be directly affected as significant volumes of consumer goods, intermediate goods and investment goods are imported from China. The likely slowdown of the  global economy and disruptions to the supply chain could affect Sri Lanka’s merchandise and service exports as well as related logistics.

The slowdown in global tourist movements will affect Sri Lanka’s tourism sector, in addition to the direct impact of lower arrivals from China. The spread of the virus to countries with a significant number of Sri Lankan migrant workers could affect remittance inflows as well. These adverse implications are likely to outweigh any marginal benefit arising from reduced global energy prices and international interest rates.