Key View
- We have revised our current account forecast to a surplus of 1.9% of GDP for 2024, from a deficit of 1.8% of GDP, due to stronger than expected tourist spending and remittances.
- For 2025, we expect the current account to revert to a deficit of 1.5% due to increased consumption and capital goods imports as the economy posts steady growth.
- The major tail risk is a rise in oil prices due to further escalation in the Middle East, which would widen the current account deficit.
We have revised our current account forecast to a surplus of 1.9% of GDP, from a deficit of 1.8% of GDP, due to stronger than expected tourism and remittance growth (see chart below).
Sri Lanka has been experiencing a promising resurgence in its tourism sector, a vital contributor to the nation’s economy, following the disruptions caused by global economic challenges and the pandemic. The island’s captivating landscapes, rich cultural heritage, and warm tropical climate continue to attract a growing number of international visitors. Government initiatives aimed at revitalizing tourism infrastructure and promoting Sri Lanka as a safe travel destination have begun to yield positive results, with steady increases in tourist arrivals seen over recent months. This resurgence is expected to play a pivotal role in enhancing the country’s external balance.
In tandem with tourism, remittances from Sri Lankans working abroad have been a crucial source of foreign exchange for the nation. The resilience and dedication of the Sri Lankan diaspora have ensured a stable flow of remittances, which provides a lifeline for many families and strengthens the economy. The robust inflow of remittances is a key factor in maintaining a favorable external balance, contributing to foreign reserves and supporting the national currency.
The combined growth in tourism and remittance inflows presents a positive outlook for Sri Lanka’s external balance. This dual-force strategy is anticipated to ease trade deficits, promote economic stability, and aid recovery efforts. As the government continues to implement policies that support these sectors, the optimistic trend not only promises economic benefits but also signifies a step towards long-term resilience and sustainable growth for Sri Lanka.
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