Sri Lanka’s industrial sector is set to drive the country’s economy this year (2021) with real GDP growth expected to gain by 4.8 per cent due to more favourable base effects from the earlier forecast of 4.2 per cent, Fitch ratings agency predicted.
The manufacturing sector remained expanded in January 2021 owing to the expansion in new orders and production; the Central Bank (CB) announced forecasting an economic growth of 5 to 6 per cent of GDP.
Central Bank Governor W.D. Lakshman said ongoing monetary and fiscal stimulus and improving business confidence would help drive growth.
Expectations for manufacturing activities in the next three months improved further with the expectation for the normalisation of economic activities within the country as well as in major export markets
The Industry sector contracted by 6.9 percent, in value added terms, in 2020 compared to the growth of 2.6 percent in 2019 mainly due to the contraction of construction activities, manufacturing activities and mining and quarrying activities followed by the adverse impacts of COVID-19.
Lack of demand in the export market for textiles, wearing apparel and leather related products due to the pandemic resulted in a decline in related manufacturing activities.
Moreover, electricity, gas, steam and air-conditioning and waste treatment activities contracted in 2020. However, the manufacturing activities such as food, beverages and tobacco products and chemical products and basic pharmaceutical products expanded in 2020.
Manufacturing industries contracted by 3.9 percent in 2020, compared to the growth of 1.8 percent recorded in 2019.
This was mainly due to the disruption in international trade and commerce together with the disturbances that occurred in domestic activities resulting from the restrictions imposed with the COVID-19 pandemic.
All sub sectors reported negative growth apart from the manufacture of food, beverages and tobacco and chemical products and pharmaceuticals. Manufacturing of textiles and wearing apparel sub sector contracted significantly by 11.9 percent in 2020, compared to 0.7 percent in 2019.