斯里兰卡：处于危险地带

AsiaSri Lanka Asia EconomicNotes Sri Lanka: In the danger zone Kaushik DasChief Economist+91-22-7180 4909 nThe CBSL maintained a status quo in its 25th March monetary policymeeting, highlighting risks to both growth and inflation outlook due totensions in the Middle East and the severe damages from Cyclone Ditwah.nGiven significant electricity and fuel price hikes, we now expect CPIinflation to average 6.0% in 2026 (vs. -0.5% average in 2025).nWe expect Sri Lanka’s 2026 real GDP growth to moderate to 3.5%yoy, from5.0%yoy in 2025, due to higher oil prices and the impact of CyconeDitwah.Visitor arrivals are down to 184,000 in March, from 279,300 in Feb,a drop of 34.1%. Given the growth-inflation outlook, we expect the CBSL tomaintain a prolonged pause in 2026.nLast month, we already revised our end-2026 target for LKR to 320 vs. theUSD and further to 325 by end-2027, given the heightened external risks. In the danger zone CBSL maintained a status quoin its 25th March monetary policy meeting,highlighting risks to both growth and inflation due to tensions in the Middle Eastand damages from Cyclone Ditwah. On inflation, CBSL mentioned:“The currentlow level of inflation, at 1.6% in Feb'26, relative to the target of 5%, provides sufficientspace to accommodate the impact of higher energy prices and their spillovers oninflation. Given the latest available data and prevailing uncertainties, inflation is nowexpected to reach the target of 5% in Q2-2026, earlier than previously anticipated.Inflation is projected to remain around the target thereafter.” Sri Lanka hiked fuel prices by around 25% in end-March, one of the steepestincreases compared to many Asian and global peers.Fuel prices were raisedthrice in March, resulting in a cumulative increase of almost 35%. However, MarchCPI inflation edged up only modestly to 2.2%yoy, from 1.6%yoy in Feb. The Marchinflation print showed food prices rising by 0.7%yoy and non-food prices rising by2.9%yoy, with the latter reflecting the impact from the fuel and gas price revisionsin March. Bulk of the fuel price hike impact is likely to be reflected in the April CPIdata, in our view, together with the impact of higher electricity tariffs (25% increasefor those consuming over 180 units), effective from 1 April and sharp increase incooking gas prices earlier this month (23%) and March (8%).We now expect CPIinflation to average 6.0% in 2026 (vs. -0.5% average in 2025). The government has also implemented energy-saving measures, includingweekly fuel rationing to restrict transport use and a four-day working week to loweroverall energy consumption. India dispatched an emergency shipment of 38,000metric tonnes of petroleum products to Sri Lanka following acute fuel shortages inthe island nation. The shipment, which arrived in Colombo on 28 March 2026,includes 20,000 metric tonnes of diesel and 18,000 metric tonnes of petrol. The oil price shock is not only negative for inflation, but also for growth.Ongrowth, CBSL highlighted:“The economy recorded a strong real growth of 5.0% in2025, despite the disruptions caused by Cyclone Ditwah towards the end of the year.Leading economic indicators point to a strong post-Cyclone recovery during early2026. However, spillovers from the ongoing conflict could weigh on domesticeconomic activity in the period ahead, should the conflict be prolonged.” In 2025, earnings from tourism increased to USD 3.2 bn (up 1.6%yoy). The currentconflict in the Middle East will definitely have an adverse impact on Sri Lanka'stourism revenue, a key driver of the economy's growth and employment. Indeed,over 34% of all tourists arriving in Sri Lanka recentlytransited through just fourMiddle Eastern airports: Dubai, Doha, Abu Dhabi, and Sharjah.Visitor arrivals aredown to 184,000 in March, from 279,300 in Feb, a drop of 34.1%. We expect Sri Lanka’s 2026 real GDP growth to moderate to 3.5%yoy, from5.0%yoy in 2025, due to higher oil prices and the impact of Cycone Ditwah. Thecombined impact will slow down private consumption (despite planned fiscal reliefmeasures and various other financial assistance) and investments too, through theuncertainty channel.Given the growth-inflation outlook, we expect the CBSL tomaintain a prolonged pause in 2026. On the external front, CBSL noted that“Gross Official Reserves increased to USD 7.3bn at end February 2026 and the Central Bank purchased a substantial amount offoreign exchange from the market in the first two months of the year. However, theongoing conflict in the Middle East poses risks to Sri Lanka’s external sector outlook,particularly through energy, tourism, trade, and remittance flows, although theoverall magnitude of the impact remains uncertain.”Indeed, Sri Lanka receiveshighest volume of workers' remittances from United Arab Emirates, Kuwait, UnitedKingdom and Saudi Arabia. Therefore, the risk is that Sri Lanka may potentially seea 5-10% drop in remittances, which will not only impact the BOP position and rupee,bu