Sri Lanka’s economy showcased robust growth in the third quarter of 2024, achieving a 5.5% increase compared to the same period in previous years. This marks the highest growth rate since 2021 and is a continuation of the positive trend observed since September 2023. This article provides an in-depth analysis of the contributing factors and sectoral performances that fueled this economic upturn.
Industrial Sector: The Growth Engine
The industrial sector, making up 27.3% of the GDP, was the standout performer with a significant 10.8% growth. This sector includes key industries such as manufacturing, construction, and mining, which have all seen substantial advances.
- Construction and Mining: Both industries rebounded strongly from previous downturns. Construction grew by 23.8%, while mining surged by 25.4%.
- Manufacturing: The manufacturing sector expanded by 5.3%, driven by notable increases in textiles, apparel, and paper products. Specific sub-sectors such as textile manufacturing rose by 13.5%, and paper products by 10.9%.
These industries benefited from lower interest rates, which eased credit supply, particularly to the private sector. The boost in export and import volumes also provided essential linkages that supported the industrial activities.
Services Sector: Steady Growth
Accounting for 55.5% of the GDP, the services sector grew by 2.6%. This sector encompasses a wide range of activities, from IT and telecommunication to financial services and real estate.
- High Performers: Accommodation and food services led the growth with an 18.8% increase, followed by IT programming and consultancy at 16%. Insurance and financial services also showed strong performance.
- Real Estate and Telecommunication: Both sectors reported growth, with real estate activities increasing by 4.9% and telecommunication by 3.6%.
This sector’s growth reflects the overall economic stability and the increased consumer confidence that has been building throughout the year.
Agriculture Sector: Modest Improvement
The agriculture sector, though smaller, contributing 8.2% to the GDP, grew by 3%. This growth was supported by increases in diverse agricultural activities such as cereal production, which saw a significant 46.7% increase, and animal production, up by 19.9%.
- Tea and Marine Activities: Notably, the growing of tea and marine fishing also contributed positively, with increases of 16.3% and 9.9%, respectively.
Despite facing some challenges, such as contractions in coffee and vegetable growing, the sector has managed to maintain a positive growth trajectory.
Additional Economic Indicators
Other indicators such as taxes less subsidies on products, which represent 8.9% of GDP, grew by 13.3%. This increase is indicative of the higher business activity levels and enhanced governmental revenues from these sectors.
Impact of Global and Domestic Factors
The DCS noted several factors that supported the economic growth:
- Global Trade: Increases in the import of investment goods and intermediate goods like textiles and cement substantially supported the industrial growth, particularly benefiting the apparel and construction industries.
- Domestic Factors: On the domestic front, improved water reservoir levels increased hydroelectric power generation, and high production in poultry and eggs supported the agriculture sector.
Conclusion
In conclusion, Sri Lanka’s economic growth in the third quarter of 2024 has been a result of concerted efforts across various sectors. With the industrial sector leading the charge, supported by steady gains in services and agriculture, the outlook for the coming months remains positive. As the country continues to stabilize and grow, these sectors are expected to continue their upward trends, potentially setting the stage for a strong economic performance in the near future.
