Sri Lanka’s Western Province increased its share of gross domestic product to 43.4 per cent in 2022 when the country experienced the worst currency crisis in the central bank’s history.
The steepest falls in shares were seen in the East and the North.
The Western province has more services and industries allowing more value to be added.
“The strong presence of the Western province is visible in most of the economic activities, especially in the Services and Industry sectors,” the central bank said.
The North Western province had increased the share to 11.2 per cent in 2022 from 11.1 per cent and Uva to 4.9 per cent from 4.8 per cent.
The Eastern Province’s share fell to 5.2 per cent from 5.5 per cent, the Northern Province to 4.1 per cent from 4.2 per cent, Southern to 9.1 per cent from 9.2 per cent, and Sabaragamuwa to 7.1 per cent from 7.2 per cent.
“Services activities predominantly contributed to the economies of all the provinces. Accordingly, Southern (59.9 per cent) and Western (58.5 per cent) provinces recorded the highest Services shares,” the central bank said.
“Regarding the Industry activities, the highest concentration was observed in Western province (34.4 per cent), followed by North Western province (32.0 per cent).”
Sri Lanka’s central bank compiled the provincial share from nominal national (with inflation) GDP estimates made by the Department of Census and Statistics.
Nominal GDP grew to 24.1 trillion rupees from 17.6 trillion a year earlier as the currency collapsed from 200 to 360 to the US dollar, spurred by a surrender rule (strong side convertibility) in a failed attempt to float (suspend convertibility).
Point to point inflation rose as much 70 percent.
Sri Lanka suffered a series of currency crisis after the end of a 30-year war, due to deliberate rate cuts enforced with inflationary open market operations blowing holes in the balance of payments without a war.
After 2015 the process of printing money for growth or macro-economic policy got formalized as targeting ‘potential output’ as the IMF taught the central bank to calculate a supposed potential output which can be bridged by printing money.
The policy has been legalized in a new monetary law.
Sri Lanka was hit by the worst bout of deliberate macro-economic policy from 2020 when rates were cut with printed money and taxes were also cut, blowing the biggest holes in the BOP seen in the history of the central bank, as well as some of the worst trade and exchange controls since the 1970s.
Source : economynext
